Colombian Peso Posts Significant Gains as Dollar Retreats on Trade, Oil Dynamics

The Colombian peso surged against the US dollar Thursday, with USD/COP dropping 45.10 points or 1.05% to close at 4,252.65. This marked the largest daily decline in over three weeks, extending the peso’s recovery from April’s steep losses.

Trading volume picked up significantly after midday as institutional investors moved decisively into peso-denominated assets. Technical traders noted the pair conclusively broke below key support at 4,270, triggering stop-loss orders that accelerated the move.

Oil prices provided crucial tailwind for the peso yesterday, as Colombia’s primary export commodity stabilized above $62 per barrel. The correlation between crude and the peso remained strong, with traders citing energy sector flows as a primary driver of the currency’s strength.

The peso’s advance accelerated following Wednesday’s bearish technical formation, when the 50-period simple moving average crossed below the 200-period SMA. This “death cross” signaled growing downside momentum that materialized fully in Thursday’s session.

“We’re witnessing a significant technical breakdown that could target 4,200 in coming days,” said a currency strategist at a major Bogotá bank. “The peso had been consolidating after April’s shock, but yesterday’s move suggests renewed confidence.”

Colombian Peso (COP) Outlook

Traders also digested Thursday’s inflation report showing April’s rate edged up to 5.16%, slightly above expectations. The modest uptick reinforced expectations that Colombia’s central bank will maintain its cautious stance on rate cuts.

Federal Reserve Chair Powell’s comments from Wednesday continued reverberating through markets, as his acknowledgment that tariff impacts remain uncertain boosted emerging market currencies broadly. Colombia particularly benefited as investors sought higher-yielding alternatives.

The Ichimoku Cloud on hourly charts now shows resistance at 4,290, with RSI at 40 indicating the peso has room to strengthen further without becoming oversold. Support has formed at 4,235, with longer-term moving averages aligning around 4,270-4,280.

Early Friday trading shows the USD/COP pair holding steady at 4,250.0, suggesting consolidation after Thursday’s decisive move. Traders await U.S. economic data today that could influence broader dollar sentiment.