The Argentine peso has surged in the past few days as investors focus on the rumored bailout by the Donald Trump administration. The USD/ARS exchange rate plunged to a low of 1,305 on Friday, down by over 11% from its highest level this year. So, will the peso maintain its strong growth?
Why the Argentine peso is soaring
The Argentine peso has been one of the worst-performing currencies in the past decades as the mismanagement of the economy accelerated.
It plunged this month as the economic crisis escalated, with dollars fleeing the market and the stock market plummeting. This crash intensified after Javier Milei’s party lost a closely-watched election ahead of the upcoming congressional election.
As such, there are concerns that Milei will lose the congressional support he needs to continue reforming the economy and creating a business-friendly environment.
The ARS crash eased this week after the Donald Trump administration hinted that it was considering options to support the economy, with Scott Bessent insisting that all options were on the table, including a line of credit, which will inject more dollars to the economy.
Meanwhile, the Argentinian central bank intervened by cutting its one-day peso repo rate by 10% to 25%. The rate cut helped to stall the Argentine peso rally.
Analysts believe that the peso will continue its jump ahead of the upcoming grain shipments worth $4.2 billion. In a recent note, an analyst from Banctrust said:
“The government is taking advantage of the flood of dollars and the increased optimism in the financial market to reduce domestic rates and give the economy a boost in the run-up to the election.”
At the same time, some analysts believe that any rescue from Washington will be temporary as the economy is still vulnerable because of its dependence on the dollar. In a note, Peterson Institute said:
“Argentina has remained a dual currency economy. It functions with two different monetary denominations: the peso, which the central bank controls, and the dollar, which it does not.”
USD/ARS technical analysis
The daily timeframe chart shows that the USD/ARS exchange rate peaked at 1,475 on September 19 and then moved to a low of 1,305 this week.
The pair remains much higher than the 100-day Exponential Moving Average (EMA). It has also formed a doji candlestick, which happens when an asset opens and closes on the same price.
Therefore, the pair will likely reverse in the coming days. If this happens, the next key resistance level to watch will be the all-time high of 1,474. A move to that level will be a sign of a double-top pattern, which will point to more downside.
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