ILOILO City – Inflation continues to be one of the biggest concerns in both the economy and not the financial markets.
Despite signs of stability in the Philippine stock index, investors remain concerned over the inflation rate and its effects on the rest of the economy.
However, local technical analyst Hernan Segovia believes that the worst of it may be over. Segovia makes the argument that the peso-dollar exchange rate has hit a “resistance” level at around P53.3 to one dollar.
“The big news this week was the June inflation rate hitting 5.2. So far the biggest inflation rate we’ve had for many months right now. A lot of factors have contributed. The weak peso, the global price of crude oil. Supply side you know,” Segovia said “But the mid 53 level from the technical point of view forms a resistance, so we might see a top range.”
Segovia’s argument is based on precedence and past price actions. Since the peso did not breach the mid P53 level when it tested it back in 2006, he argues that a similar trend may happen now – though it is by no means certain.
“What’s good for this range is that it has been tested previously in the 2006 and 2007 chart,” Segovia said. “So going forward, the peso might strengthening back to 52 and then making its way back to the 50 level, and it could be favourable to what we’re seeing right now.”
Should this happen, Segovia believes that it will be good for the stock market and business confidence./PN
