Sorry for the late commentary this week chaps.
Think I’ll start this week off with a funny:
Specialist banking group Investec is looking at a range of R7.05 to R7.65/$ for the rand next week – News24
Hah hah. Man, that’s hilarious. That’s like saying ‘today it could either be sunny, cloudy or raining’. Just a little FYI for the GBPZAR followers: The above piece of useless information translates into a forecasted weekly range of 13.85 to 15.05 (based on current GBPUSD levels). So there you have it guys ‘expect GBPZAR to trade between 13.85 and 15.05 this week’. Hah hah. Who actually approves this junk? It is a mystery never mind allowing it to go to press. It’s embarrassing.
So it seems that I’m completely wasting my time with this week’s commentary as someone clearly has some phenomenal insight into this market. What a waste of time and money!
Anyway, I’ve been away this weekend so am going to keep it short and sweet.
Our SARB seems to have about as much foresight as the above analyst and are now clearly behind the curve and not entirely excited about putting their hands up and saying ‘Hey guys, sorry but we’ve duffed this one a bit’. In all the excitement of a strengthening Rand and lower interest rates it seems that they have forgotten that these changes eventually filter into the market in the form of higher inflation and things swing very quickly the other way. Whilst all this high-fiving was going on it seems that they have fallen behind the inflationary and interest rates cycle and are now playing catch up. Still they won’t admit their little duff up and this past week the ZAR weakened substantially as they raised interest rates by 0.5%.
Hay, I thought currencies are supposed to strengthen when interest rates increase? Yip, that can be true but it can also be that maybe the market has seen through the economic optimism façade in SA and can ‘hear that train a coming’. That little train is carrying a heavy load of inflationary and political pressures which are maybe outweighing SA’s positive interest rate differential.
So anyway, last week I said that I expected USDZAR 7.07-7.10 to hold and was desperately looking for the presence of real money players to come in aggressively at these levels to sell ZAR. The market pulled back to exactly this band before these players kicked in and shot USDZAR up to around 7.38.
Seldom do I call this puppy as accurately as last week but bear with me while I run this one for all it’s worth.
….and I quote from last week ‘As long as 7.07 hold on the downside then we should clear the 7.23 highs this coming week and push on towards 7.40’
OK, so 7.07 held almost to the cent and we stopped just short of 7.40 at 7.38.
We have since pulled back which is expected as the market is also very much overbought at this point in time to give 7.40 and 7.55 a good run for their money. I expect the market to consolidate around current levels and maybe stabilize within the 7.22-7.40 range over the next week or so before heading higher again. The tide has turned but I’m also seeing a slight divergence on one of my technical indicators which is telling me we may have to wait a while for this market to move higher.
Level to watch for this week:
7.55 (Yearly high – buy a break above)
7.40 (Good resistance – break above takes us up to challenge 7.55 highs)
Current – 7.27
7.22 (Former resistance now turned support – need to see price hold above this level to continue the upward run)
7.07-7.10
Good luck for the week ahead
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