Hi there,

GBPZAR currently trading at 14.92. Man, what a rubbish rate! Ha ha. Isn’t strange how things change so quickly? A few weeks ago we were trading at 13.15 and we would’ve done anything to see a rate of 14.92. Now that we’ve shot up so quickly to a high around 15.30, all of a sudden 14.92 seems like such a low rate!

Let’s keep perspective here – 14.92 is still a good rate for those looking to buy ZAR and the fact of the matter is that we are still trading at the highest levels in the past few years. The trend is definitely up but as mentioned last week, the market needs to pause for breath and re-gather its strength before heading higher.

Without overcomplicating things, what the market usually does when it breaks above a key resistance level (being 15.00) is to then retrace back to the 15.00 level just to make sure that it is on the correct directional path. The market needs reassurance that it’s on the right road and this reassurance comes in the form of strong support and buyers around the 15.00 level.

So this is what was happening most of last week and early into this week. The market is (1) pausing to regain its strength, and (2) looking for long-term real money buyers around the 15.00 level to reassure it that the major trend is indeed up. Without this reassurance, price will always struggle to make confident headway upwards.

You must understand that the market is currently trading at levels not seen for a few years and the price action around these levels will determine the long term future of the ZAR. It’s at these key levels that the market seeks reassurance for the future moves ahead. Without question, it wants to go up but it needs to be sure that the rest of the market is on board with this move.

So simply what we are seeing is the market garnering support for its future intended move – which is up! (weaker ZAR)

So what does this mean to you? The key at the moment is for important support levels to hold as the market hopefully finds buyers around these levels. We need to find them soon for this upmove to get some steam. Keep an eye on key support levels as if these hold then it proves the existence of long term real money buyers at these support points and we should see price continue to move strongly upwards. If we see key support points breaking then it’s indicative that these players aren’t overly excited about selling ZAR at these levels and we could see ZAR strengthen in the short term.

Please note that the budget is being announced this week which could affect the ZAR particularly if the SA government comes up with a feasible bail out plan for Eskom (which has been a primary contributor to the recent ZAR weakness – be careful of the outcome of this or any developments as you could see the ZAR strengthen quite rapidly on the back of any good news)

Keep an eye on the following levels this week:

8.00 – Psychological level
7.8750 – Last weeks 2008 high
7.63 – Current Price **
7.63 – Key Support Area (Expect to find buyers around this level – we are currently trading around this level so keep an eye on the market)
7.59 – Former high broken last week
 
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.

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