USD/KRW analysis as South Korea’s imports, exports slump again

The USD/KRW exchange rate rally continued on Wednesday after another set of weak economic data from South Korea. It jumped to a high of 1,338.20, the highest point since May 17th. 

Weak South Korea data

South Korea’s economy is struggling as external demand for some of its products wane. Data by the Commerce Department showed that exports dropped by 16.4% in July after falling by 16.5% in the previous month. As I wrote here, exports have been falling since November.

Meanwhile, South Korea’s imports dropped by 25.4% in July, leading to a trade surplus of $1.56 billion. These numbers mean that the country’s economy is not doing well, mostly because of the lagging semiconductor demand.

Therefore, there is a likelihood that the Bank of Korea will maintain interest rates unchanged in the next few months. In July, it left them intact for the fourth straight month and insisted it was premature to start talking about interest rate cuts.

The USD/KRW pair also reacted mildly to data from the United States. In a report, the statistics agency noted that retail sales jumped in July as inflation drifted downwards. The headline retail sales figure jumped by 0.7% in July while the core figure jumped by 1%.

Therefore, the Fed could deliver another rate hike in its September meeting. If this happens, it will push rates to the highest level in more than 23 years. The Fed will publish minutes of its last meeting on Wednesday.

USD/KRW technical analysis

USDKRW chart by TradingView

The USD to KRW exchange rate has been in a strong bullish trend in the past few weeks. This rebound started when the pair formed a double-bottom pattern at 1,263. It recently moved above the neckline of this pattern at 1,322 and is approaching the next resistance at 1,343.

The pair has moved above the 25-day and 50-day moving averages. Therefore, the pair will likely continue rising as buyers target the next key resistance level at 1,360.