USD/THB: implications of the Thailand election shocker on Thai baht

The Thai baht gained modestly after the latest Thailand election. The USD/THB pair dropped to 33.83, a few points below last week’s high of 34. Still, there is an uneasy calm after voters sent a shocker to the existing military rule in the country.

Thailand election results

Thailand held an election that pitted pro-democracy parties vs military rule. Pro-democracy opposition parties won with a commanding lead as they sent a rebuke to the military. Move forward party led the vote and was followed by Pheu Thai party, which is led by Paetongtrn Shinawatra. 

On the other hand, parties associated with the military like the United Thai Nation party received about 12% of the vore. Palang Pracharath party received just 10% of the vote.

While the outcome was a positive one, it presents major risks to the Thai economy, which explains why the BHT was a bit uneasy. For one, Thai has seen several military coups in the past few years. As such, another military coup in the next few years or months cannot be ruled out.

The military has a strong say in the Thai economy. As I wrote in this article, the constitution gives the millitary the role to select the Senate, which has about 250 members. The Senate votes alongside the 500-seat elected parliament. 

Therefore, Move Forward’s policies to reform the military and the monarchy could lead to major issues in the government. 

The other risk for the THB is that governments that win by a landslide tend to disappoint because of the extremely high expectations. We have seen this in several countries, including the United States where Joe Biden’s approval rating has been at historic lows.

USD/THB technical analysis

USD/THB chart by TradingView

The 4H chart shows that the USD to THB exchange rate retreated slightly after the outcome of Thai’s election. It moved to a low of 33.71 and then pared back some of those gains. It is also consolidating at the 25-period moving average while the Relative Strength Index (RSI) and the MACD indicators have drifted downwards.

Therefore, the USD/THB pair will likely continue falling in the near term as sellers target the key support at 33.50. It will then bounce back as the reality of Thai’s future sets in. If this happens, the pair will likely move to 34.50 by the end of the month.