This EM pair has been rising from last 3-4 consecutive weeks, approximately about 2.32%. Fundamentally, yes we admit that there could be a scope for this pair to recover and bounce back. The long in USDTWD appears to be more appealing on both the Fed and China angles.

But on the contrary, technically, we see no traces of significant bounce back so far except the most likely hammer pattern candle formation on monthly graph. Whereas, the ongoing upswings on daily charts seem exhausted with leading oscillators approaching overbought trajectory. Thus, speculating further upswings are absolutely not advisable.

But, on hedging grounds, amid growing concerns of upswings of this pair, it is advisable to go long USDTWD 3m NDF (at spot ref: 31.71) with a target of 33.14 (+5%) and a strict stop slightly below the recent low at 30.99 (shy above -2%).

The trade horizon is 3-6 months. With negative forward points, carry in the 3m tenor is positive at 19bp/month.

Risk Profile: Chinese growth, the US activity data, the dollar cycle weak US data, specially the upcoming payroll report, which may cause a significant reduction in fed rate hike probabilities.

A period of stabilization of Chinese growth dynamics or additional debt-indices stimulus. Resumption of the dollar sell off would strengthen the TWD.