Emerging markets – Forex by Lloyds TSB

Argentinian peso: USD/ARS: December targets at 3.30 have been exceeded. The market is currently easing into a range which could be the first stage of a reversal, but further confirmation is required.

Latin America and Central America

• Argentinian peso: USD/ARS: December targets at 3.30 have been exceeded. The market is currently easing into a range which could be the first stage of a reversal, but further confirmation is required. Whilst a move back to 3.36/ 40 looks possible, a break of 3.2850 would indicate a return to peso strength into Q1 2009.

• Brazilian real: USD/BRL: There is some evidence of confidence returning to the real as, broadly speaking, the market has range traded for the past 6 weeks. However if the real can hold below 2.40 into December, the set- up would point to a recovery into Q1 2009. Trigger levels are initially at 2.20 and then 2.12. This is stil tentative and a one week close over 2.40 would negate the set-up, putting the risk towards the 2.50 into January.

• Colombian peso: USD/COP: Peso weakness has slowed with 2400 a significant resistance point. For the moment a range consolidation is expected with 2390/2234 the parameters. Whilst a break of either level would signal the next trend, the default view favours further dollar strength.

• Chilean peso: USD/CLP: Resistance at 681 and support at 625 mark the main decision levels for the peso.Whilst copper has not confirmed a base as yet, it is approaching attractive long term levels. In the short term a push for 675/80 looks likely, but the two-day close below 625 remains the main signal for a return to investor
confidence.

• Mexican peso: USD/MXN: Volatility remains high here keeping investors sidelined. However, on a positive front the peso is off the lows of the past six weeks and, despite the swings, is in a range trade. This is encouraging as an indication of a top. However, the market can be easilty drawn through 14.30 resistance as the market thins further into year end, which looks to be the more likely scenario. It would take a rather large correction back to 12.50 to imply a sentiment change.

• Peruvian sol: USD/PEN: The target at 3.20 remains as resistance builds up over 3.16. Although the short term is confined to a range, the upside break is the favoured scenario.

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