Despite plenty of bad economic news all over the place, the Thailand SET index still managed to close up 3.32 points, or practically unchanged, for the week. The National Economic and Social Development Board (NESDB) said Thailand Q3 GDP grew 0.6% year-on-year, worse than the expectations of 1.0%. The board cited weak consumption, investments and exports. The NESDB also said it expects GDP growth of 1 percent for the full year.

I might add that Thailand was running a trade deficit in Q3 and that could be part of the problem. Q4 will not be much easier for Thailand as Japan just entered into a recession and an Asian currency war is looming. The Thailand SET is now pricing in a cut in the benchmark base rate from 2.0% to 1.75% or lower by the Bank of Thailand. I tend to believe that all kinds of tax hikes, such as inheritance taxes and property levies, should also be off the table for now. Thailand shouldn't make the same mistake as Japan.

People's Bank of China (PBOC) announced a cut in the one-year benchmark lending rate by 0.4% to 5.6% and in the one-year benchmark deposit rate by 0.25% to 2.75%. The market was already expecting the PBOC to cut rates anytime before the end of the year, as the Chinese economy is getting worse. My opinion is that the decision by the PBOC to cut rates could be influenced by the yen falling at a very alarming rate. Chinese products and services become less competitive in the global market as the yen depreciates.

The dollar traded as high as 118.96 yen, before pulling back to 117.81. The People's Bank of China interest rate cut and an indication from the European Central Bank to step up its asset purchases probably came in to support the yen from falling further, particularly since the yen is already way oversold.

One may want to pay attention to the two technical resistances, the dollar to yen exchange rate and the U.S. Dollar Index or DXY, pronounced "Dixie". For the yen trade, there are technical resistances at around 120 and 125 yen per dollar, before a major break out.

The DXY, which is 57.6% euro weighted and 13.6% Japanese yen weighted, is now consolidating at ~87.70. The technical head resistance is at ~89. One can now start betting which currency will break out first.

The currency turmoil may have a net-net zero benefit on Thai exports as the Thai Baht appreciates against the euro and the Japanese yen, while it depreciates against the U.S. dollar and the Chinese yuan reminbi. Thailand SET investors may, however, want to understand how the currency works as it has a direct impact on the capital flows and the unconventional currency carry trade, meaning the stock markets. 

A bullish “Tweezer” bottom is in at 1567.32-1557.31. Tweezer patterns occur when two or more candlesticks touch the same bottom for a tweezer bottom pattern, or top for a tweezer top pattern. The near-term head resistances are 1591 and 1602. A reverse head-and-shoulders chart pattern has emerged. It could be possible in coming weeks that the reverse H&S will breakout, which will send the Thailand SET to the upper range of ~1660.