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CHILE: USDCLP Closes Above 50-Day EMA Resistance, Copper Declines Further 1.6%

CHILE
  • USDCLP has continued to reverse some of its sharp declines since April, as copper prices have fallen back from record highs and geopolitical and global financial market uncertainties have weighed on LatAm FX. Copper futures have fallen a further 1.6% to start the week, which may add additional pressure on the peso at today’s open. 
  • Furthermore, we have noted that there are some indications that short CLP positioning is creeping back up after cleaning out following the terms-of-trade shock last month.
  • Amid the worsening backdrop for Latam currencies and this cleaner slate in terms of positions, JPMorgan think CLP could revisit the lows from the beginning of 2024, and as such, have entered a long USD/CLP 3m NDF (entry: 933; target: 970; review: 905).
  • In terms of technicals, USDCLP ended last week on a bullish note, breaking and closing above resistance at the 50-day EMA - at 926.11. This strengthens the short-term bullish condition and signals scope for a stronger recovery near-term. Scope is seen for an initial climb towards 940.93, the May 8 high and 948.30 further out, 61.8% of the bear leg between Apr 16 and May 20. Clearance of this retracement point would further strengthen a bullish condition. 
  • However, it is worth noting that moving average studies remain in a bear-mode position. This suggests that the recent recovery remains a correction. First support to watch lies at 900.00, the May 6 low. The key support and bear trigger lies at 881.73, the May 20 low.
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