USD/THB analysis as the Thai baht regains momentum

The USD/THB exchange rate has dropped in the past five straight days as the Thai baht rebound gained steam. The pair was trading at 34.83 on Wednesday, lower than last week’s high of 35.57. 

Thai GDP data

Thailand has made headlines in the past few days. The most important news was on Thaksin Shinawatra, the former prime minister who was jailed after returning from exile on Tuesday.

Another crucial news was that the parliament voted Srettha Thavisin as the new prime minister after a long political deadlock. Srettha is a real estate mogul of the Pheu Thai Party.

Meanwhile, Thailand published relatively weak economic numbers on Tuesday. Data showed that the economy rose by 0.20% in the second quarter after growing by 1.70% in the previous quarter. This growth was lower than the median estimate of 1.20%.

The economy expanded by 1.8% on a YoY basis, lower than the median estimate of 3.1%. It had grown by 2.6% in the previous quarter. Therefore, the new prime minister will have a tough job revitalizing the economy.

Thailand’s economy has been boosted by the resurgent tourism sector. The most recent data shows that the number of tourists in the country have jumped in the past few months. The government expects over 29 million visitors this year.

However, in a statement on Wednesday, the Bank of Thailand governor warned that the industry was weakening. He noted that exports and tourism were softening, signaling that the bank will leave rates unchanged. Bank of Thailand delivered its final rate hike earlier this month.

The key challenge for Thailand’s economy is the Chinese performance. As I have written before, the Chinese economy is slowing at a faster pace than expected. This will impact the country’s exports.

USD/THB technical analysis

USDTHB chart by TradingView

The daily chart shows that the USD to THB pair has pulled back in the past few days even as the dollar strength continued. It has retreated to 35, lower than July’s high of 35.74. It has moved below the important support level at 35.38. The pair has moved slightly above the 25-day and 50-day moving averages.

The USDTHB pair remains above the ascending trendline that connects the lowest levels since January. It has also formed a double-top pattern. Therefore, the short-term outlook for the pair is bearish, with the next level to watch being at 34.35.