On the wires…

• Trump says China, other countries can’t have Nvidia’s top AI chips
• Possibility of US troops, or air strikes in Nigeria in response to Islamist insurgents
• UK train stabbings carried out by lone attacker, not terrorist
• Murray murders- investigation to start from scratch
• Protea women lose World Cup final to India
• Ox ruled out of Bok tour as Boks arrive in France

  Quote of the day

“The best way to treat obstacles is to use them as stepping stones. Laugh at them, tread on them, and let them lead you to something better.” — Enid Blyton

  The indicators

Currency crackdown…

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

*See attachment for technical analysis on other major currencies

USDZAR: USDZAR turned up near the range lows (near 17.07) last week as the USD bulls returned with EURUSD dipping below 1.1540 (previous lows. Indeed, the focus has shifted to the range highs near 17.50. Ultimately, the pair has been trading in a 17.07 -17.50 range since mid-September, and these are the key levels we are watching near term. Our stance has been for a dip to the 16.70-17 area first before 18.50-19 area could be reached. However, a sustained breach of 17.50 could signal and we would watch for a similar sustained breach at 1.1320-1.1400 in EURUSD to confirm that the ZAR bulls are firmly on the back foot. Going further back, we note that USDZAR has largely been confined to a 17-20 range trade since Q2 23, and our stance is that if the ZAR ends the week below 17.50 then the 16.70-17 area could be reached first, but the risks are that the ZAR could struggle to stay below the 17 handle on a sustained basis. Bigger picture, we have shown the monthly charts across the pairs we cover, which highlight that the recovery legs seen in the ZAR this year are likely a correction, and that the larger trends for the ZAR are bearish, as highlighted in the attached slides.     

EURZAR: EURUSD turned down near the 100-day moving average (near 1.1663) and is now threatening the 200-day moving average (near 1.1322), and our call for temporary move in the EUR towards the 1.1900-1.2000 area is under threat. Follow through below the 1.1320-1.1400 area would be our cue that a top in the EUR is in place, earlier than we allowed for, and that the 1.1000 level could be reached first. Indeed, with monthly momentum rolling over, this could be a warning signal that the uptrend in the EUR, which was initiated in September 2022 could be challenged, and that our target of 1.1000 could be too conservative. As for EURZAR, we are watching the action near the 19.80-19.90 area (range low and 52-week moving average) for direction. Firstly, the ZAR bulls struggled near 19.80 five weeks ago, and secondly, the 52-week moving average has been a tough hurdle on numerous occasions over the last two years. Our stance is that while the pair holds below the 20.65-20.75 area (previous turnaround levels), the ZAR bulls could be holding the reins to target 19.50 near term. However, we are wary as weekly momentum is poised near previous turnaround levels, and the EUR bulls have been trying to make a stand near the 52-week moving average (currently near 20.07). Indeed, the 52-week moving average has been key on numerous occasions since 2022, and if the pair ends the week above it then we could be wrong, and the risks are for a bottom in the EUR. Follow through above 20.50 would be the confirmation we are looking for that we are wrong, and that the 21 level could be reached this quarter instead of next quarter.                

CNHZAR:USDCNH came within striking distance of the upper bound of our 7.05-7.08 target area before turning up at the latter end of the week. With the pair currently poised near 7.12, our focus has shifted away from 7.08. Indeed, a push above 7.16 could warn that we are wrong, and that the 7.20-7.25 area could be reached first. As for CNHZAR, the pair has been trading in a to-and-fro pattern, largely between 2.39 and 2.46 for the last four weeks, and our call for a dip to the 2.35-2.37 area has been delayed. However, the latter area was a tough hurdle in November 2022, and the ZAR bulls could struggle to hold below this area on a sustainable basis. Ultimately, a wider to-and-fro pattern (2.35-2.81) has defined the moves since November 2022, and we would be looking for an upward leg in the CNH near 2.35-2.37 to reinstate this wider range trade. Indeed, we believe that both the 2.37 and 2.55 levels could be reached over the next six months.   

CNHZAR:USDCNH came within striking distance of the upper bound of our 7.05-7.08 target area before turning up at the latter end of the week. With the pair currently poised near 7.12, our focus has shifted away from 7.08. Indeed, a push above 7.16 could warn that we are wrong, and that the 7.20-7.25 area could be reached first. As for CNHZAR, the pair has been trading in a to-and-fro pattern, largely between 2.39 and 2.46 for the last four weeks, and our call for a dip to the 2.35-2.37 area has been delayed. However, the latter area was a tough hurdle in November 2022, and the ZAR bulls could struggle to hold below this area on a sustainable basis. Ultimately, a wider to-and-fro pattern (2.35-2.81) has defined the moves since November 2022, and we would be looking for an upward leg in the CNH near 2.35-2.37 to reinstate this wider range trade. Indeed, we believe that both the 2.37 and 2.55 levels could be reached over the next six months.   

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  On the radar…

  Did you know?

Baguettes have precise dimensions: they must be 65cm long and weigh 250 grams.

Have a good week,

Wayne Rosenberg