Taiwan’s central bank kept its policy rate at 2% for a tenth straight quarter, adopting a mildly hawkish tone as it raised its 2026 growth forecast to 11.48% and lifted inflation projections while pointing to sticky services inflation. It did not indicate an imminent rate rise. The Taiwan dollar held broadly steady after post-FOMC US dollar strength, helped by a rebound in local equities and the return of foreign equity inflows following five consecutive sessions of selling.
Near-term USD/TWD moves are expected to be driven chiefly by foreign equity flows, tech sentiment and the broader US dollar direction rather than monetary policy, with a pullback in US yields or stabilisation in technology shares potentially easing pressure. Technically, daily bullish momentum remains intact, though RSI has cooled near overbought levels, leaving room for consolidation or an intraday pullback. Support is seen at 31.83/86, tied to the 100 DMA and a 50% Fibonacci retracement of the 2026 low-to-high move, then at 31.71/73 aligned with the 21 and 200 DMAs plus the 61.8% Fibonacci level; resistance sits at 31.90/32 alongside the 38.2% Fibonacci marker and the 50 DMA.
Focus On Foreign Capital Flows For USD/TWD Direction
We suggest that derivative traders look past the central bank’s decision to keep interest rates at 2% and instead focus heavily on global tech sentiment and equity flows. Even though the central bank raised its 2026 economic growth forecast to a striking 11.48%, foreign capital movement remains the primary driver for the Taiwan Dollar. Historically, foreign institutional flows into Taiwan’s stock market have shown a strong 70% correlation with short-term movements in the USD/TWD currency pair.
Trading Strategies Amid High Correlation With Tech Stocks and Capital Flows
For the coming weeks, we recommend option traders consider long straddles or volatility-based strategies to capitalize on sudden swings in global technology stocks. If foreign investors resume their heavy selling of Taiwanese tech equities, we expect USD/TWD to quickly test the critical resistance range between 31.90 and 32.00. However, if global tech stocks stabilize, the pair is highly likely to drift downward toward its key 100-day moving average support at 31.83.
We advise keeping tight risk limits around the 31.71 to 31.73 support area, where the 21-day and 200-day moving averages currently sit. Since daily technical indicators show that USD/TWD is currently near overbought levels, the room for further upward movement may be limited in the short term. Derivative traders should closely monitor net daily capital flows on the Taiwan Stock Exchange to guide their directional plays.
