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Chart: Emerging Market Currencies

June 11, 2018

The US dollar is on the move as the US economy remains strong and the Fed pushes on with rate hikes and quantitative tightening.  A logical casualty of this is emerging market currencies.  The chart shows our equal-weighted index of 25 emerging market currencies (against the US dollar), and 200-day moving average breadth across those 25 countries.  The key point is that the Topdown Charts EMFX index has made a sharp turn to the downside, and market breadth has completely broken down.  You could make a case that market breadth is oversold at this point, especially given valuations have pulled back to neutral from previously overvalued.  But personally I don't like the risk-reward for EMFX at this juncture given the prevailing global macro cross-currents.

 

 

 

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