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Baht’s Parabolic Signals Rise to 2008 High: Technical Analysis

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July 16 (Bloomberg) -- The Thai baht may strengthen 0.8 percent against the dollar in a month, taking it to a two-year high, after a technical indicator known as the Parabolic System pointed to a buy signal for the currency, according to Mitsubishi UFJ Morgan Stanley Securities Co.

The baht may appreciate to a “psychologically important level” of 32 per dollar should it strengthen beyond the May 7 and April 21 highs of 32.15 and 32.07, respectively, said Minoru Shioiri, chief manager of foreign-exchange trading at Mitsubishi UFJ. The currency traded at 32.24 as of 8:50 a.m. in Bangkok, according to data compiled by Bloomberg. It reached 32.22, the strongest since May 10.

The Parabolic System is represented by a series of dots on a chart, or a stop-and-reversal-point. If the price of an asset is below the SAR, in this case the dollar, then you should sell it. The greenback’s five-day moving average also dropped below the 20-day line on July 13 to form a pattern called a “golden cross,” another bullish signal for the baht, said Shioiri.

“Many technical indicators this week began to show signs of baht strength,” said Tokyo-based Shioiri. “The pace of the appreciation may be gradual due to potential intervention by the central bank to stem the currency’s gains.”

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net;

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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