The Thailand SET continued its fifth straight week of losses to close at 1529.96, despite the Bank of Thailand (BOT) making a surprise cut in its benchmark interest rate by 25 basis points to 1.75% last week. Investors mostly focused on the Federal Open Market Committee (FOMC) meeting on March 17 and 18 and were expecting the Fed to remove the term "patient" from its Fed monetary statement.

Currency traders, who were piling their bullish bets on the dollar, decided to take profits after U.S. Federal Reserve Chair Janet Yellen said after the meeting that the Fed is no longer patient about hike rates. The U.S. Dollar index (DXY), a weighted geometric index of the value of the U.S. dollar relative to a basket of six major currencies, tanked 1.25% to close at 98.781 for the week.

The dollar-Thai baht (USD/THB) exchange rate tumbled 1% to close at 32.56 baht per dollar while the euro-Thai baht (EUR/THB) surged 2.08% to close at 35.2309 baht per euro on Friday. The global markets, including the Thailand SET, seemed not to get any direction from the Fed as Yellen also said, "Just because we removed the word patient from the (monetary) statement doesn't mean we are going to be impatient".

The Thailand SET sank 0.98% to an intraday low of 1517.30 before bouncing back to close at 1529.96, just above the 1528 technical resistance on Friday, the day following the Yellen announcement. 

There is no response yet from the Thai bond market as the 10-year Thailand Government bond yield closed at 2.83% on Friday, unchanged for the week. The yield of the U.S. 10-Year Treasury took a 9.39% nose dive as the yield spread between the 10-year Thailand Government bond and the U.S. 10-Year Treasury, now yielding 1.932%, has widened to 0.898% on Friday.

From our technical viewpoint, a series of bearish lower-lows, or a “swing low”, has now emerged in the Thailand SET chart pattern. The downside risk still exists, as the Relative Strength Index (RSI) could pullback and retest the March 17 low of 31.22. We believe that bottoms are indicated when the RSI drops well below 30 as a RSI below 30 is considered to be oversold.

There are two technical supports at about 1528 – 1526.65, or 38.2% Fibonacci retracement level, and at 1500 – 1497.88 or 50% Fibonacci retracement level, if the Thailand SET sell-off continues.

A potential head-and-shoulders pattern, with a neck line at about the 1548 level, has also emerged. The formation of a right shoulder in the next several weeks, if it should happen, could signal a major correction in the Thailand SET. In our opinion, bullish sentiment could return if the Thailand SET can manage to close above the 1548 level.