The Philippine peso continued its freefall this week as global risks continued rising. The USD/PHP exchange rate surged to a high of 56.75 on Monday, its highest point since November 2023. It has been in a strong uptrend, rising by over 2.76% from its lowest point in March. 

The USD to PHP exchange rate has been in a strong bull run in the past few months as the US dollar has continued rising. The index has surged by almost 6% from its lowest level this year as inflation has remained above the Fed’s 2.0% target.

Inflation fears are continuing this week after Iran attacked Israel during the weekend. The implication of a wider conflict in the Middle East since it could affect the prices of crude oil and natural gas.

There are also concerns about the industrial metals industry. The prices of key metals like copper, aluminum, iron ore, and nickel have jumped sharply as demand rises and after Western countries ratcheted their sanctions against Russia. 

There are signs that Philipinne’s inflation will continue rising in the next few weeks. The headline Consumer Price Index (CPI) jumped from 3.4% in February to 3.7% in March. It has risen in the past two straight months, ending a decline that started in January last year.

The Philippine peso has also been pressured by the trends in the remittances industry. Personal remittances came in at $2.95 billion in February, a 3% increase from the same period in 2023. Remittances peaked at over $3 billion in December.

Looking ahead, there are signs that the Federal Reserve and the Philippine central banks will maintain a hawkish tone in the coming weeks. The Fed will likely maintain rates at an elevated level for longer or even hike if rates remain at an elevated level.

Meanwhile, the Philippine central bank will also likely maintain rates at a higher level for a while since inflation remains high.

To be clear: the Philippine peso is not the only one that is crashing. The Malaysian ringgit is nearing its all-time low while the Chinese yuan and Taiwan dollar have also continued retreating.

USD/PHP chart by TradingView

The daily chart reveals that the USD to PHP pair formed a golden cross pattern in March. This is an important pattern, which forms when the 50-day and 200-day Exponential Moving Averages (EMA) make a bullish crossover.

It has also jumped above the crucial resistance point at 56.65, its highest point on June 25th. Moving above that level invalidated the pair’s bull run. The Average Directional Index (ADX) has moved to almost 50, which is a sign that it has a bullish momentum.

Therefore, the outlook for the pair is bullish, with the next point to watch being at 57.15, its highest swing in September 23rd. The stop-loss of this trade will be at 56.55.

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