South Africa

It’s pretty tough to see anything positive at the moment in SA and this negative tone is being expressed through a weaker ZAR, and deservedly so. It’s simply not looking good for the SA economy and the country at the moment and the blame can be laid squarely at the feet of those in power who haven’t had the foresight to see any of this coming. Politically and economically it’s a complete mess and it would be naïve to think that foreign investors, both existing and potential, are looking at the current state of affairs shaking their heads. It’s a serious serious problem. SA struggled to attract the expected foreign investment in the good old Mandela years so I’m a little skeptical about what lies ahead.

This skepticism is currently being reflected in the ZAR where GBPZAR jumped around 50 cents last week. I always like to say that the market will tell you when things are right and when things are horribly wrong. It offers an unbiased opinion as to what is really happening. Forget the governmental spin doctors, financial market experts .etc. There is only one truth and that is the market. It offers us an unbiased, unemotional insight into what is really happening.

So the market has spoken and it seems it has shouted ‘sell’.

Technically, last week we were testing key support at 7.42 on USDZAR and we’ve subsequently seen a pretty aggressive bounce triggered by buyers defending this level and perhaps spurred on by the opportune levels to sell ZAR. This could be seen as a double bottom by some but it’s not really from a strict technical perspective although the market may view it as the go-ahead to challenge the highs at 8.25

The only downside support that I’m concerned with is 7.42. As long as that holds then I’m happy. Short-term upside resistance areas are 7.76 and 8.00. A break above 7.76 is our near term goal for ZAR bears and this will further strengthen the underlying major bear trend and perhaps signal an end to the medium term correction that we’ve experienced.

So for this week we are looking to further ZAR weakening but need to see a break above 7.76 to enforce this view. If 7.76 doesn’t break then we will see a fairly quiet range-bound week.

Good luck and all the best for the week ahead!

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