USD/KRW retreats after South Korea trade surplus and weak PMI
- The USD/KRW price retreated after the modest improvement in South Korean trade.
- The country recorded its first trade surplus as commodity prices dropped.
- South Korea’s manufacturing PMI remained in a deep contraction zone in June.
The USD/KRW price drifted downwards on Monday even after a series of weak economic numbers from South Korea. The USD to South Korean exchange rate dropped to a low of 1,306 on Monday, much lower than the June high of 1,324.14.
South Korea economic troubles
Copy link to sectionThe South Korean economy is going through major challenges as international demand fizzles. For one, the country’s exports and imports have continued dropping in the past few months. Data published on Saturday showed that exports dropped by 6% in June.
South Korean exports, which play an important role in the economy, have dropped in the past nine straight months. This decline was mostly because of the overall weak semiconductor sector. On a positive side, the decline in June was better than May’s decline of 15.2%.
South Korea’s imports also declined in June. The country’s imports fell by 11.7% in June after falling by 14% in the previous month. Analysts were expecting the country’s imports to drop by 11%.
On a positive side, South Korea moved into a trade surplus for the first time since April last year. It recorded a surplus of over $1.13 billion during the month, helped by lower commodity prices. South Korea benefits when key commodities like crude oil, natural gas, and copper are falling.
The USD/KRW pair also dropped after the weak South Korean manufacturing PMI data. According to Nikkei, the manufacturing PMI dropped to 47.8 in June from the previous 48.4. This decline was worse than the median estimate of 49.4. The PMI has been in a general downward trend after peaking at 55.3 in March 2021.
Looking ahead, the next important catalyst for the USD to KRW exchange rate will be the upcoming US jobs numbers scheduled for Friday. These numbers will likely make the case for more Fed tightening.
USD/KRW technical analysis
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The USDKRW pair peaked at 1,324 in June. Since then, the pair has pulled back sharply to the current 1,305. The pair has dropped below the important support level at 1,308, the highest point on June 23rd and in the first week of June.
The pair has moved below the 25-period and 50-period moving averages. At the same time, the MACD and Relative Strength Index (RSI) have all drifted downwards. Therefore, the pair will likely continue falling as sellers target the next key support at 1,300. More upside will be confirmed if it moves above the key level at 1,320.
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