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Sahmino callsCurrency

UAE DirhamAEDNeutral

The dirham has blown through our 646,530 rial target, and its premium to the free dollar is still near zero

Horizon: Short term (1 to 2 weeks, through 14 Mehr 1405)

Price when published

663,320 rials

That dayup3.7%

Support

654,520 rials

Invalidation

639,960 rials

The levels on the chart

Since writtenup9.8%

Conclusion

I am closing the bullish call on reaching the target and turning neutral: I put about 55 percent odds that the dirham does not close below 639,960 rial by 14 Mehr, because the political risk behind the free dollar's jump — namely the rejection of Hormuz's proposal, per the FXStreet report (6 Mehr) — is still open. Risk: the dirham is just the free dollar divided by the peg, and any reversal in the dollar reaches it one for one.

The evidence

  • Dirham on 6 Mehr 1405 at 13:40: 663,320 rial, 3.65 percent above the 5 Mehr close of 639,960 rial; the 4 Mehr card's target (closing above 646,530 rial) is recorded with today's close.
  • Dirham times the 3.6725 peg gives an implied dollar of about 2,436,000 rial, against a free dollar of 2,433,000 rial (13:34); the dirham's premium is about 0.1 percent, versus near zero on 5 Mehr.
  • So the whole move came from the free dollar, and this figure shows no sign of remittance settlement getting harder.
  • Today's move is about 2.7 times the dirham's 20-day daily volatility (1.35 percent).

If it holds

If the dirham holds above 654,520 rial (today's low), the base scenario is consolidation of a fresh step together with the free dollar.

If it breaks

If the dirham closes below 639,960 rial (the 5 Mehr close), this view is invalidated and today's dollar jump has been fully reversed.

What to watch

What to watch: the dirham's premium to the free dollar as a gauge of remittance difficulty, exchange center announcements, and news of possible talks this week.

Every call on this symbol

19 calls; the move to the next call from the prices when written

  1. 28 September 13:42NeutralThe dirham has blown through our 646,530 rial target, and its premium to the free dollar is still near zero663,320 rialsup9.8%
  2. 26 September 08:45BullishDirham passed our invalidation level, but nearly all of the 1.67 percent gain was the free dollar's work639,000 rialsup3.8%
  3. 21 September 14:09NeutralOf the 0.51 percent rise in the dirham today, 0.38 points came from the dollar and the rest from the transfer premium; I'm closing my bearish call631,100 rialsup1.3%
  4. 19 September 08:38BearishOf every 100 rial of dirham decline in one week, 96 rial was the dollar's doing and 4 rial was the remittance premium's doing623,550 rialsup1.2%
  5. 14 September 11:08NeutralToday's dirham range broke on both sides; its width was less than half of one day's intraday range636,500 rialsdown2.0%
  6. 14 September 08:43NeutralOur 632,650 rial support broke, the 620,710 rial invalidator did not break: the dirham closed at the session low628,400 rialsup1.3%
  7. 13 September 11:34NeutralThis time the remittance premium did the work: the dollar fell 1.6 percent and the dirham only 1.3 percent632,750 rialsdown0.7%
  8. 12 September 08:47BullishNearly all of the dirham's jump to a record 646,530 rial was dollar work, not a havala premium, and we raise the invalidator646,530 rialsdown2.1%
  9. 9 September 11:15BullishOur own upgrade condition was met: the rate went above 624,710 and the remittance premium didn't widen either, so we turn bullish629,090 rialsup2.8%
  10. 8 September 13:04NeutralOf the 1.53 percent dirham gain today, 1.29 points was the work of the dollar and 0.24 points was the work of the remittance premium, which widened to 0.99 percent618,640 rialsup1.7%
  11. 7 September 09:01NeutralThe dirham reached within 0.5 percent of our 628,000 rial target, then reversed and closed at that same day's low, so we retract the bullish call608,600 rialsup1.6%
  12. 6 September 08:43BullishThe 615,000-rial resistance we had flagged ourselves was broken, and the dirham closed at 620,600 rial620,600 rialsdown1.9%