USD/COP: Colombian Peso Falters Against the US Dollar on a Day the Greenback Loses Against Most Currencies

The USD/COP slowed its downward slide that started yesterday, with the market showing smaller losses in a sideways trend.

The USD/COP continued its bearish momentum yesterday, which started Friday March 22, losing 47 pesos to the dollar, or 1.21%. However, while most currencies have been gaining against the dollar today, the peso has stopped its bullish trend.

The Mexican Peso, Brazilian real, and Chilean Peso all made gains today against the US dollar of 0.21%, 0.34% and 2.15% respectively. Not so easy for the Colombian peso which is more or less flat for the day.

The market is expecting some important news for this Friday when we get the release for Non-farm Payrolls. While today’s news from the US for ISM Services PMI which was published weaker than expected sparked the USD depreciation.

We’re also expecting some important news from Colombia this week. On schedule we have the following data releases:

• Thursday – Exports YoY
• Thursday – PPI YoY
• Saturday – Inflation YoY
• Saturday – Inflation MoM

Although Exports may not be a very important data for the US dollar it’s much more relevant to the Colombian peso given the small size of the money mass. The PPI and inflation data are certainly more important, plus the forecasts expect them to show sharp decreases.

So, we’ll have more clues about just how likely Banrep are to cut rates at their next meeting on April 30. For now, the central bank has cut rates at all 3 meetings since December 2023, and if inflation keeps declining I would say it’s likely to do so at the next meeting.

Technical View

The day chart for USD/COP below shows a market in full bear trend, with price well below the Ichimoku cloud. However, today’s candle has stalled on an important support level (black line) set on December 28, 2023.

The RSI just clipped the 30 mark yesterday, indicating over sold territory. Typically, an RSI on the day chart that coincides with a previous low and RSI of 30 gives way to a correction. So, we may expect a correction from this point based solely on the RSI number.

However, today’s candle, which is likely to close with a small body also strengthens the case for a retracement. Having said that, if the market closes much lower than 3,808, we may see further price action lower.