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FXOne would like to thank Warrick Butler from Standard Bank for his contribution to the comment this morning.
Good morning
“A chemist froze himself at -273.15 degrees Celsius. Everyone said he was crazy, but he was Ok”
Current USDZAR level: 16.4350/16.4450
Rand range yesterday: 16.3600-16.4700 and NY close: 16.3950
A week since my last commentary and a lot of water being tread. Fortunately, no sharks have come for a nosey look yet, although it feels like they on the periphery. It somehow feels like the summer of 1975 again. Just watched Jaws and now you are swimming with your mates at night in the pool……..
It will take something monumental to weaken the Rand with the Iran war moving the dial a sum total of 7.5% and even then, one could suggest the Rand was overdone below 16.00 when Trump decided to push the big red button. The protest action yesterday was not that kind of event to create panic. There are certainly green shoots of risk aversion growing, but they aren’t enough to cause a ruckus just yet. Yesterday saw the release of the first trade deficit in South Africa for the last 16 months but given the swing in the oil price versus precious metals, it should not be a surprise to anyone. If the price of oil remains subdued, then the terms of trade should push back into positive territory soon enough. Unfortunately, the situation in Iran/Hormuz is not completely resolved and I don’t even think Trump knows what he is going to do next, so there is always a risk of volatility in that region. Not that you can trade for event risk, it becomes too expensive. Speaking of which, UST’s are rearing their head again with the 2-year note pushing back up to the resistance trend-line around 4.20% which I highlighted in my last commentary. This is one to watch closely as a break and close higher on a weekly basis could cause a minor panic given the indebtedness of the world in dollar terms. A move to 5.00% cannot be discounted. There are many reasons it can reach there but those are irrelevant to think about when trading something on a technical basis and I am definitely not a macro-strategist.
The dollar index (DXY) is also showing signs of potential strength, although it needs to break above the 102.00 resistance level to confirm further USD strength. Equities remain elevated beyond comprehension but my opinion and belief around this financial asset are better left for long nights of Buffelsfontein Brannas, and not a market commentary. So whilst the Rand finds it easier to grind stronger, seemingly on a daily basis, I am very wary of blindly sitting long risk and so I don’t. The Rand outperformed over the past couple of day (lots of questions about this) but with month end flows and a potential sizeable inflow (Shell) this strength can be explained away by once-off factors. Levels to watch on a short-term basis in the Rand are 16.48, 16.56 and 16.65. we have seen consecutive lower lows since 16.65 traded on the 24th of June and a break of this little trend could be noteworthy’
Good luck and have a great day and great day ahead
Support levels – 16.35/16.30, 16.1500, 16.00/15.95, 15.8000
Resistance levels – 16.6500, 16.8000, 16.9400, 17.00/05, 17.2500
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