Hi ladies and gents.
Geez, I’m seriously short of material this week and wish I had a lot to say but I really and truly don’t have much to add onto last week’s commentary.
The past week has been extremely quiet on the ZAR – perhaps too quiet some would say! USDZAR has traded a tight 10 cent range at one point pushing hard to try break above the key 7.05 level but quickly being sold back to the 6.95 range lows.
The one comforting point for ZAR bears (i.e. those who feel that the ZAR will weaken) at this point in time is the following:
The USD is getting absolutely hammered at the moment over default concerns in the sub-prime mortgage in the US. These high risk type mortgages make up something like 20% of the entire US mortgage market and there are huge worries over the potential default rate, as well as a few hedge funds operating in this market going bust in the past month or so. There are also central banks diversifying their foreign currency holdings out of USD into other currencies such as the EUR, GBP .etc.
So who really cares and how does this affect the ZAR?
Well I’m not overly concerned as to whether people care or not and this doesn’t affect the ZAR in a huge way……
BUT
What I am interested in is the current movement in USDZAR on the back of the USD trading at all time lows versus the EUR, 26 year lows against the GBP, and multi-decade lows versus the CAD, AUD and NZD.
The logic goes a little something like this: If the USD is trading at multi-decade lows against pretty much every major currency in the world, why is it not trading at similar lows versus the ZAR?
The interesting thing about USDZAR this past week was that the USD actually strengthened against the ZAR whilst EURUSD moved to all time highs (USD to all time lows versus the EUR)
Remember, the market reflects the truth and nothing but the truth. It’s smarter than us, a better trader than us, blah blah blah – so why then is the USDZAR staying pretty steady while the USD moves to all time lows?
Is the market trying to tell us something?
In my opinion the market is trying to show us that the current fundamental picture in SA doesn’t deserve to see the ZAR strengthening beyond current levels. Back to last week’s question: Do you think SA’s economy and political stability is going to be stronger in 12-18 months time than it is now? I think not and hey, with elections around the corner, infighting within the ruling party, a tightening interest rate cycle, soaring inflation, massive unemployment, and huge credit demand .etc. maybe the market is trying to tell us something with the ZAR unable to strengthen versus the USD.
Once again though, ignoring the fundamental outlook completely, the technical picture at present looks extremely ZAR bullish (ZAR to strengthen) at the moment and the ZAR simply has to break above the 7.05 level soon to break to impressive head and shoulders pattern developing on the daily charts.
Man, it’s a horrible prospect but the technical picture points to a move below 6.86.
At the moment there’s a big fight on: The fundamentals pointing to a weaker ZAR and the technical’s pointing to a stronger ZAR.
It’s a very tough call but the only advice I can give in these situations is to monitor your key levels. Breaks above or below key levels lead to strong, momentum driven moves that give strong clues to the future direction of a particular currency. Every week it is important to keep an eye on these key levels and make sure you are ready in case one of them breaks.
Keep an eye on our key levels this week as per the below:
7.05 ** (Neckline of the H&S pattern and former lows now resistance – need this level to break this week and a good break above will be a very positive sign for USDZAR bulls)
6.97 – Current Price
6.93 ** (Last week’s low – need this level to hold this week so we form higher lows in consecutive weeks. If this breaks we will go down to test 6.86)
6.86 (2007 lows)
So for example, if you are looking for a weaker move in the ZAR, your key levels to watch short-term are 6.93 and 7.05. A break above 7.05 is a good indication that we could move strongly higher and you are well positioned to benefit from this move, and a break below 6.93 serves as a major warning signal that we will go lower to challenge 6.86 and possibly below.
PLEASE NOTE THAT WE ARE ALSO NOW DOING VERY SHORT COMMENTARIES ON OUR WEBSITE WWW.EXCHANGE4FREE.CO.UK THROUGHOUT THE WEEK PROVIDING UPDATES ON THE INTRADAY MOVES ON THE ZAR AS WELL AS REALTIME ANALYSIS KEEPING YOU IN TOUCH WITH MOVES AND IDEAS ON THE ZAR.
Good luck and all the best for the week ahead.
Please do not hesitate to call Exchange4free for any advice or foreign exchange related queries.
08456521022
We are the experts on the ZAR and provide the cheapest way to send your money home.
- Guaranteed best exchange rates on the ZAR (we will beat any quote)
- Completely FREE money transfers with no hidden costs
- No settlement or deposit fees at your SA bank (which can be up to R500)
