USD/PHP forms bullish triangle after Fed, Philippine rate decisions

The USD/PHP exchange rate continued rising and is hovering near its all-time high after the last central bank decisions from the United States and the Philippines. The pair was trading at 59, a few pips below its record high of 59.15. It has risen by 6.40% from its lowest level in October this year.

Federal Reserve interest rate cut

The USD/PHP exchange rate held steady as most emerging market currencies crashed after the Federal Reserve decision. 

In a statement on Wednesday, the bank slashed interest rates by 0.25% for the second consecutive meeting. It has now brought interest rates down by about 1% this year. 

The main change in the Fed statement was that Beth Hammack, a member of the FOMC dissented and voted to leave interest rates unchanged. Also, the dot plot showed that many officials were afraid of delivering more interest rate cuts.

Therefore, officials expect that the bank will deliver just two cuts in 2025, down from the previous guidance of four. These officials are mostly concerned about the impact of Donald Trump on the economy since he has proposed more inflationary policies like tax cuts, mass deportations and tariffs.

The Fed expects that the headline and core inflation will take longer to move to the 2% target than previously thought as housing prices remain stubbornly high. Most officials see these numbers falling to 2% by 2027 instead of the previous 2026.

The Federal Reserve statement led to a strong US dollar as the DXY index jumped to $107.80, its highest level since 2022.

Emerging market currencies were some of the worst-performing currencies as concerns about their debt servicing continued. These concerns rose as US borrowing costs rose after the Fed decision.

Philippines central bank cuts

The USD/PHP exchange rate also reacted to the latest Bangko Sentral ng Pilipinas interest rate decision.

Like most central banks, it decided to slash interest rates by 25 basis points, a move it hopes will help the economy recover. It has now slashed rates three times this year.

The bank has cut rates as the headline Consumer Price Index (CPI) retreated from the 2022 high of 8.7% to a low of 1.9% in August.

Recently, however, inflation has started to creep back up again, with the headline CPI rising to 2.5% in November.

Recent economic data showed that the economic growth has slowed in the past few quarters. It expanded by 5.3% in the third quarter after growing by 6.3% in the previous quarter. Therefore, the bank hopes that the rate cuts will help to supercharge the economy.

USD/PHP technical analysis 

The USD/PHP exchange rate has been in a strong uptrend in the past few weeks. It has risen and reached the key resistance level at 59.10, the upper side of the ascending triangle chart pattern. In most periods, this is one of the most bullish chart patterns. 

The pair has moved above the 50-week and 100-week Exponential Moving Averages (EMA). Also, the Relative Strength Index (RSI)  and the MACD indicators have pointed upwards. 

Therefore, because of the ascending triangle, there is a risk that the Philippine peso will have a bearish breakout in 2025. If this happens, the next USD/PHP level to watch will be the psychological point at 65.