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On the wires… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Quote of the day | |||||||||||||||||||||||||||||||||||||||||||||||||||||
“The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true.” ― James Branch Cabell | |||||||||||||||||||||||||||||||||||||||||||||||||||||
The indicators | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Currency crackdown… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
FXOne would like to thank Warrick Butler from Standard Bank for his contribution to the currency comment this morning.
“I was mugged by a man on crutches, wearing camouflage. I thought, you can hide but you can’t run.”.
Current USDZAR level: 16.6150/16.6250 Rand range yesterday: 16.5750-16.7300 and NY close: 16.6150
Talking about the Rand is pointless these days. One hopes for increased volatility from a trading perspective but of course that would mean our world will look a lot gloomier than it already does, so it is really a case of cutting one’s nose off to spite the face. Last week I bought an exorbitant amount of dollars for prudential limit management, and it was almost too easy. In some ways I can see the alure of South Africa with all that is going on in the rest of the world. We may not get our bins cleaned and have consistent access to water but at least we don’t have Trump or bombs going off around us, well other than stink bombs. Whew a morning run in the heat and its not just my unfit fatness that is vomit inducing….. Tomorrow, we go to the polls in South Africa. The US head for midterms today. I am really hoping for a fun couple of days but also resigned to the fact that most people fear change and we will inevitably end up with the same old situation.
As per the above meme, people/sheep do tend to vote with their hearts and not their heads. Hope does not bring about change. Having said that I don’t think I am alone in hoping that the Orange Geriatric is held accountable for the absolute mayhem and apparent corruption he has dealt on the people of the Great States. In overnight news, South Africa will lose its place in AGOA from the 1st of January. On the face of it, it’s a poor headline but the reality is that a) we have pretty much expected it for the last 6 months and b) China took over from the USA as SA’s biggest trading partner in 2008. Whilst the US is still our 2nd biggest partner the estimated impact is only on roughly $1.9bio of trade. As with most of Trump’s inept policies, we still aren’t even sure if this will impact the exporter or the consumer. In other words, do the US importers just stop buying due to higher tariffs, or do they just pass on the additional costs to the end user? The Rand took it in its stride yesterday on the announcement, by strengthening a couple of cents.
Technically the Rand is close to a strong resistance level around 16.70/75 (see dotted red line on included chart). There is a symmetrical wedge forming, which has essentially been the whole tightening range of this year since the Iran war high in March ’26. A break higher and we could very well be in corrective territory of a medium-term trend lower, which started in early 2025.
Even though the terms of trade are still strongly in favour of the Rand, there is risk of a greater global move in risky assets (AI Bubble, Credit implosion, War etc) and this could be the catalyst for a move weaker. Positioning is still strongly in favour of the Rand with our high real rates enticing investors hand over fist. Lots of feel good so far this week however on the back of possible peace talks in Iran, but I think we have seen that show s few times before.
At current levels the Rand is maybe worth a fade, but you will need to keep a really tight stop on this position above 16.7500. I am more inclined to sit on my hands and watch proceedings over the next couple of days and rather trade the break.
Good luck and have a voting day tomorrow and further week ahead
Support levels – 16.5700, 16.4200, 16.2500, 16.10/16.07, 16.00/15.95 Resistance levels – 16.7400, 16.8500, 16.95/17.00, 17.2500, 17.5000
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On the radar… | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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Did you know? | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Roughly 50% of the oxygen that humans breathe is produced by plankton, algae, and other microscopic marine organisms in the ocean rather than trees and forests. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
All the best,
Kyle Moulster
