On the wires…

·   Russia and Ukraine to discuss peace today in Istanbul

·   Two dead and 500 arrested in France during PSG win celebrations

·   Possible new dwarf planet spotted near the edge of the solar system

·   Trump says he plans to double steel, aluminium tariffs to 50%

·   Runner dies in freak accident after oak tree falls on her during the CT marathon

·   Bok scrumhalf slammed for “shameless gamesmanship”

·    Sundown’s fail again as Pyramids take CAF Champions League

Quote of the day

“There are two seasons in Scotland: June and winter” – Billy Connolly

The indicators…

Currency crackdown…

FXOne would like to thank Judy Padayachee from ABSA for her valued contribution to the crackdown this morning.

ZAR – tentative bearish signal following selloff on Friday

The information below is a product of Sales and Trading, and does not constitute research.

Although the ZAR posted monthly gains against majors, AUD and CNH for the month of May, we note that the weekly and daily moves are showing some cracks as discussed below. Indeed, the ZAR stumbled against the USD on Friday, and posted its biggest daily loss for the month. Coupled with the weekly turnaround signal (Piercing Pattern) and steady climb higher in USDZAR, the risks are for further losses in the ZAR near term. Furthermore, the 18 level has been tested for three consecutive days, and follow through above 18.20 (near 200-day and 52-week moving averages) would be our trigger that the ZAR could be on a more aggressive correction near term, which is our bias, with potential targets in the 18.50-18.80 area. However, we cannot rule out another attempt to drop to the 17.40-17.60 area thereafter.

EURZAR: in the case of EURUSD, the pair has been trading sideways for the last eight days, and we are watching the 1.1210 and 1.1420 levels for direction and the next breakout. Ultimately, we believe that the EUR is in a medium-term uptrend, but could take some breathers along the way. As such, we believe that both the 1.1200 and 1.1600 levels could be reached over the next two to three months. Thereafter, we are targeting the 1.1800 level. As for EURZAR, we note that the ZAR bulls have been struggling to drop to the psychologically-important 20 level, despite numerous attempts last month. We note the turnaround near the 20.10 level on Friday, and given that the pair has been holding above this level for the last two weeks, and coupled with the steady climb higher in daily momentum, we believe that the risks are for a break above the 20.57-20.60 area near term. Potential targets could be found in the 21-21.10 area. Thereafter, an attempt could be made to test the 200-day and 52-week moving average, currently in the 19.64-19.66 area to target the 19.25-19.50 area. Ultimately, we believe that both the 19.50 and 20.80 levels could be reached over the next three months.

GBPZAR: the GBP bulls lost some traction against the USD last week, and we cannot rule out some stalling in the uptrend near term. However, given support in the 1.3000-1.3100 area, we believe that 1.3650 could be surpassed medium term, with near. In the case of GBPZAR, we note that the ZAR has sold off for two consecutive weeks, and on Friday it posted one of its biggest daily gains for the month. However, the bearish leg is taking place within a four-week range trade of 23.90-24.45, and we continue to watch these boundaries for direction. However, given the steady climb higher in daily momentum, and the recent threat of the range high, the risks are for a topside break with potential targets near 24.70-24.90 (retracement levels). Such a bullish comeback in the GBP could push daily and weekly momentum to previous tops in the weeks ahead, and the risks are that thereafter, the GBP could run into resistance, and a potential downturn could follow. As such, we continue to look for another attempt to reach the 200-day and 52-week moving averages (currently in the 23.39-23.43 area) in Q3 25. However, a move above 24.90 would signal a more aggressive selloff in the ZAR than we are allowing for, with next major support for the ZAR near the 25.15-25.50 area. Ultimately, the pair has been trading in a wide range of 22.35-25.47 since Q2 23 and we believe that both the 23.30 and the 24.70 levels could be reached over the next two-three months

AUDZAR: The AUD has been trading sideways against the USD (0.6340-0.6540) for the last six weeks, and we expect further sideways action near term. As for AUDZAR, similar sideways action between 11.42 and 11.69 has prevailed over the last 11 days. However, we note the turnaround signal posted on Friday, the weekly stalemate pattern and the  trendline hurdle near 11.40, which could underpin a move towards the range high, and potentially higher. Follow through above the 11.69-11.70 area (range high and 200-day moving average) this week would be our trigger for a move towards the 11.80-11.90 area (52-week moving average and retracement levels) first. That said, we note that the YTD moves have been choppy, and we expect more of the same this quarter. Indeed, we expect that a move to the 11.80-11.90 area could be followed with another downward leg towards 11.20-11.37 in the AUD. However, if AUDZAR stays below 11.70 this week, then our call for a near-term selloff in the ZAR is wrong, and the 11.20-11.37 area could be reached sooner than we allowed for.    

CNHZAR: the CNH has been struggling against the USD and following the bearish moves from 7.16 last week, the 200-day moving average near 7.22 has been tested this morning. We cannot rule out a push to 7.25 near term. In the case of CNHZAR, the CNH posted its first bullish week out of the last seven weeks, and posted a bullish pattern on Friday. However, the moves are taking place within a nine-day range of 2.47-2.51 range, and we note that the CNH bulls are struggling to follow through this morning, As such, we are watching the range boundaries for direction. That said, we remain wary as daily momentum has turned up near previous turnaround levels. Ultimately, the pair has been trading in a wide range of 2.41-2.70 since Q3 23 and we believe that both the 2.40-2.42 area and the 2.56 levels could be reached over the next two-three months

Disclaimer:

This communication (“this communication”) has been provided by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa, a subsidiary of Absa Group Limited, with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa (“Absa”). Absa is regulated by the South African Reserve Bank and is a registered financial services and credit provider. Absa has provided this communication for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. This communication is from an Absa Sales and/or Trading desk and is not a product of the Absa Research department. This communication has not been produced, reviewed or approved by the Absa Research Department, and is not subject to any prohibition on dealing ahead of the dissemination of research. The views in this communication are not a personal recommendation and do not take into account whether any product or transaction is suitable for any particular investor. This message is subject to the provisions at: http://www.absa.co.za/disclaimer. This communication is confidential and no part of it may be reproduced, distributed or transmitted without the prior written permission of Absa. By messaging with Absa you agree to the provisions of this disclaimer.

 On the radar…

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