USD/CLP bulls take a breather, outlook still bullish

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  • USD/CLP trades neutral at 884.35, with technical indicators flat.
  • The Chilean Central Bank kicking off its easing cycle contributes to the upward trajectory.
  • The Federal Reserve (Fed) is expected to deliver a hawkish pause on Wednesday. 

On Tuesday, the USD/CLP bulls are taking a breather after pushing the pair upwards by more than 3.82% in September and are consolidating gains at the 884.35 area.

Monetary policy divergences with the Federal Reserve (Fed) may explain the increase of the pair as since July, the Chilean Central Bank has already cut rates by 1.75%, and markets are discounting 1.50% more of easing in the remainder of 2023. The week’s highlight for the CLP will be the release of the September 5 minutes on Friday, where investors will have a clearer outlook of the bank’s stance for the upcoming October and December meetings.

On the US side, rate swaps markets have practically priced in that the Federal Reserve (Fed) will hold rates steady at 5.25-5.50% on Wednesday. However, Chair Powell will try to convince the markets pausing won’t mean the end of the tightening cycle, leaving the door open for another hike. In addition, the fresh macro forecasts and the revision of the Federal Open Market Committee (FOMC) members’ famous dot plots will be closely watched by investors to continue modelling their expectations.

USD/CLP Levels to watch 

 Considering the daily chart, the USD/CLP presents a bullish outlook. Despite turning flat, the Relative Strength Index (RSI) lies comfortably deep in positive territory, while the Moving Average Convergence (MACD) histogram prints rising green bars. On the other hand, the pair is above the 20,100,200-day Simple Moving Average (SMA), suggesting that bulls are clearly in command of the bigger picture.

 Support levels: 884.00, 882.00, 880.00

 Resistance levels: 895.00, 898.00, 900.00.

USD/CLP Daily Chart