GTQ: More Depreciation Ahead For The Quetzal

After holding long-term trendline support at GTQ7.8600/US$, the Guatemalan quetzal has bounced back to test resistance at GTQ7.8265, which if broken could presage some moderate upside for the unit. However, we believe that our expectation for steady depreciation will continue to play out well, after the unit fell from GTQ7.6800/US$ in April to current levels, reflecting an increasingly negative fundamental picture for the unit. In the coming days, with momentum on the daily, weekly and monthly charts increasingly pointing towards additional downside, the currency looks set to re-test support at GTQ7.8600/US$, with a break setting the quetzal up for a move towards GTQ7.9000/US$ in the first instance. We note that a break of this support level would be a highly bearish signal, suggesting that a move back to GTQ8.1000/US$ could not be ruled out.

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