USD / TWD – Bullish despite better than expected GDP

Taiwan economy grew 3.42% Y/Y in Q4 2012, versus expectations of 3.0% and a huge jump from previous 0.98%. Together with the announcement, the National Statistics Department raised 2013 GDP forecast from 3.15% to 3.53%, while CPI forecast was raised from 1.27% to 1.31%.

The better than expected results was relatively muted, with the Taiwan Stock Exchange Weighted Index (TWSE) recovering from earlier losses to to trade at -0.11%. TWD also failed to strengthened, which is unexpected as emerging markets currencies tend to appreciate when local economies are doing well.

Hourly Chart

This weakening of TWD in the light of better GDP figures is perplexing, considering that US GDP figures announced yesterday was way below expectations – negative for the first time in 13 consecutive quarters. FOMC policy statement was also surprising dovish with no mentioning of potential end dates. Both development should be bearish USD but strangely USD/TWD held still.

Weekly Chart

Weekly Chart shows 29.8 acting as a strong resistance against further TWD slide. With the latest rejection from 29.8, current price could still trade between 29.365 and 29.65 (using consolidation range of Feb – Apr 2012 as reference). Price is also showing lower lows and lower highs since Oct 2011 decline, and Stochastic readings could peak once more soon, suggesting lower upside for USD/TWD in the longer term.

Long-term direction seems to agree better with the current economics fundamentals that we’re seeing right now – a Strong Taiwan vs Weak America narrative. However short-term sentiment is certainly bearish TWD despite what long-term Tech and Fundamentals tell us. Keep a watch out for any future bearish economic news from Taiwan as that could be the catalyst for a greater upward move for USD/TWD given the short-term bias.

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