Coming to you this morning from our Johannesburg office and it looks like it’s not just the weather that’s taken a turn for the worst.

This week we’ve emphasised a concern about the market staging a retracement from last weeks R 1.50 drop against the US Dollar and last night that situation unfolded with the USD/ZAR dropping over 1.8 % in value, closing the session at R14.70 to the US Dollar, R 16.85 to the Euro and R19.00 to the Pound.

Our expectation is for a 50% retracement to around R 14.85 to the US Dollar. We saw slight pull back in the morning to around R14.28, but unfortunately the momentum just wasn’t there, and we turned around pretty swiftly and spent most of the local trading day around R 14.35 before pushing higher in the US session. As it stands this morning, we’ve broken through the first line of resistance at R 14.42, the next line comes into play around R 14.77, R14.85 and then on R15.00 to the USD.

There are a couple of ways of this thing could play out at the moment, BUT given the overall trend, they all ultimately end the same. Its just a matter of timing. The movement we’re seeing now is more than likely a selloff in anticipation of a poor budget speech and Moody’s review. The market will inevitably want to head back to the long-term support line but in the meantime, it’ll look for a medium-term trend line to follow.

With the market is trading at the moment, there is a strong possibility we’ll see R 14.85 and potentially R 15.00 to the USD in the near future.

Please be advised that our overall view of the market has not changed, we are still trading in an upward trend which suggests that future payments are more than likely going to cost more. If you would like to discuss hedging options and how to use FECs (Forward Contracts) to lock in rates now while the market is lower – please get in touch with our dealing desk on 011 888 0125.

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