ZAR Forex Report

Today we will look at some technical factors influencing the Rand, before focussing on local and global events.

Technicals are often overlooked, but are very helpful and useful – it allows one to take, at the risk of sounding overly “corporate-y” or “cliché-y”, a bird’s eye or holistic view at a currency.

In this instance, when one looks at the USDZAR graph for the past three years, we see an upward trend with lots of peaks and troughs, ups and downs. What stands out is the spike towards the end of last year (Nenegate), followed by a reversal as the ZAR strengthened again. Again in June there was another spike (Brexit) followed by another stronger Rand.

Such was the significance of the recent run of the Rand, that the trend has broken through some key resistance levels…interestingly, the appreciating ZAR is now aiming towards the next key level, which is around 12.65. If one takes away all external factors, the key level following 12.65, should it be hit, is around 11.70 which is pretty close to the 200 week moving average. This is also in line with the Big Mac index.

Of course we all know it is probably never going to happen due to outside factors such as local and global economics and politics…in fact, a reversal is also very likely as investors look to close their positions and take home their profit. One can argue that it still makes for interesting reading though.

The local elections have come and gone and certainly has left the ruling party something to think about. While they will be thinking on what went wrong, the rest of us are wondering how the DA and EFF are going to work together, should there be a coalition government in parts. At the very least, let’s hope the strong competition is a signal to all parties to up their games and improve delivery – certainly, it was seen as a positive for SA and was replicated in an appreciating currency.

Moving away from politics, Stats SA delivered good news last Thursday as mining production has increased for June. The Rand however lost ground on Friday, despite the positive data – a firm reminder that we’re but a small slice of a very large global pizza. The market has priced out a US rate hike for this year, meaning SA remains an attractive investment option from a carry trade perspective due to our higher interest rates.

The week started with emerging markets rallying with the ZAR trading around the 13.25 mark against USD on Tuesday morning and 17.24 and 14.96 versus GBP and EUR respectively.

This week, watch out for UK and US inflation data on Tuesday, as well as Euro inflation on Thursday.

Have a great week.

ZAR FOREX RATES

USDZAR = 13.2449
GBPZAR = 17.1899
EURZAR = 14.9368
AUDZAR = 10.2379
NZDZAR = 9.65896
CADZAR = 10.3313
CHFZAR = 13.7694

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