WEEKLY ZAR ECONOMIC AND TECHNICAL COMMENTARY – 4 March 2007
I had a little chuckle to myself this week when USDZAR reversed from around 7.05 up to 7.40.
Truth be told, everything was pointing down and I was waiting for the bottom to fall out of USDZAR.
In my last commentary I said the following:
‘The only thing that could save the USDZAR from this fate is some serious reserve bank intervention to try keeping this market above the USDZAR 7.00 level. Will it work? Only for a while but if the reserve bank can keep price above 7.00 for a while longer then some politician is BOUND TO SAY SOMETHING STUPID OR SOME WEAK ECONOMIC INDICATOR MAY SAVE US’
True to form that SA government comes out with some silly mining tax recommendation and
within a few hours USDZAR is trading 7.25 and GBPZAR has jumped about 40 cents.
I sometimes suspect that we don’t give the reserve bank and the SA powers that be enough
credit. They are either extremely naïve or extremely clever! We were a few hours away from
completing a massive bullish ZAR formation and USDZAR was under a massive amount of
pressure. Very strange that the SA government releases this report at this very opportune time.
They must have known is would club the Rand and I just find it a little weird that they release it
just when USDZAR was about to drop off 20 cents.
Good work though if it was purposefully orchestrated.
Food for thought.
Trade balance figures came out this week once again posting a surprisingly heavy deficit. The only thing ‘surprising’ about these numbers is that the past 3 months trade balance figures have seen an all time record R30 Billion deficit, followed by a R390 Million surplus, which has now been followed by an R11.9 Billion deficit.
Am I the only one that thinks there is something strange about the volatility in these numbers? I’m sure one or two economists must think I’m an idiot for suggesting such a thing but the fact is that economist are on average about R10 Billion out on their forecasts for these figures every month. That’s not R1 Million, not even R100 Million out………….but R10 Billion. So it’s all a bit strange to me and I don’t logically see how South Africa’s trade balance swings R30 Billion one month and then R10 Billion the next. It’s crazy.
So while I’m dishing out a bit of food for thought – it seems consumer credit in SA is also becoming an issue and supposedly fuelling inflation in the economy. I’m repeatedly hearing Mr. Mboweni telling the SA public to stop spending so much money as they’re stimulating inflationary forces and thus forcing his hand to raise interest rates.
The commonly accepted idea for high consumer credit levels is that people are spending too much. Is it not possible that high credit levels just may be the result of the fact that the average person in SA can’t afford to live without utilising credit facilities?
This goes back to my thinking that SA is far more expensive than everyone is making out. Does the average person in SA need credit just to be able to survive, or does he need credit to afford that fancy car? It’s a bit of both I suppose but I get the feeling that there is a fairly convincing case for the fact that SA is too expensive for average people to live anymore that they need credit just to get by.
Anyway, enough of that.
Technical Commentary
Okay, not much more to say besides we’ve had a major reversal of a downside break out of the triangle formation. Price has been aggressively rejected from lower levels and retraced through the entire triangle formation to form a weekly reversal on the candlestick charts.
Blah, blah, blah.
USDZAR 7.40 is the short-term topside resistance and price closed exactly at this level on Friday night. Nice high weekly close and in my opinion we should see a weaker ZAR this week. We need to push strongly through this 7.40 level early this week.
I have read various reports suggesting USDZAR 8.00 is on the cards and I wouldn’t disagree. Talk in the market is that a lot of the longer-term macro traders have stops above 7.40 which will essentially mean that many ‘real money’ players will no longer be playing the ZAR bull move, and would probably start looking to trade a weaker ZAR.
Just as a side note – the ZAR is the weakest performing currency this year. Supposedly.
It’s not looking great but keep your expectations in check.
The stock markets have been a dogshow this week, and similarly the currency markets have been extremely volatile. It’s been seriously scary weeks so don’t get carried away. Let’s see what happens in the markets this week but I suppose we should hopefully see some nice follow through on the ZAR’s move weaker this week.
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