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Weaker USD Keeps Supporting EM Equities

EMERGING MARKETS
  • The USD weakness in the past week following Powell's 'dovish' speech at Jackson Hole has been supporting EM risky assets, especially equities.
  • The chart below shows that after receiving support at the low of their LT downward trending channel, EM equities (EEM) are currently testing key resistance at 53.40, which corresponds to the 100D and 200DMA.
  • A break above that level would open the door for a move up to 54.30 (high of the downward trending channel).
  • Even though the trend on the USD looks slightly bearish, momentum on the Dollar could resume as Fed taper nears (consensus is currently pricing an announcement in November for a December start).
  • Next important data to watch is US non-farm payrolls on Friday, which could also have a significant impact on EM markets; a big 'miss' following the poor ADP print on Wednesday could increase the selling pressure on the USD.

Source: Bloomberg/MNI

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