The SARB will release their latest interest rate decision on Thursday and expectations are pointing to another 25bps hike which will push the repo rate to 7.50%. I haven’t posted an idea on the pair in quite a while but a whole lot has happened since my last idea.
March has been a very turbulent month for the local unit, but the rand is holding up relatively well in the month of March given the recent fragilities in the US banking sector. As things stand the rand has depreciated just over 1% against the dollar this month. The rand however slid to a three year low of 18.71 earlier this month but it did manage to pull the pair to a monthly low of 18.01 on the back of a broad-based weaker dollar.
Currently it seems as if the pair has completed an abc corrective pattern following the 5-wave impulse which saw the pair climb from the yearly low 16.70 to 18.71 earlier this year. In the beginning of the year, I predicted that the pair would hit the 2020 high of 19.36 in the 1H2023 (I tagged the idea in this post). I’m not prepared to stick my neck out just yet to confirm my previous idea haha however a break above the yearly high of 18.71 could confirm the move as it will signal another impulse move higher. A re-test of the pair’s 50-day MA rate currently at 17.90 is still on the cards given the down trend on the daily RSI and sell signal on the MACD. The 50-day MA coincides with the 38.2% Fibo retracement rate of 17.91 and we would need a convincing break below this level in order to invalidate the move north of 19.00. Currently the 23.6% Fibo rate of 18.22 and the neckline of the parallel channel is holding support for the pair.
Fundamentally there is not much supporting the rand. Commodity prices had a woeful first quarter off the back of the 10%+ declines in brent crude oil. Credit markets (US 10year yields) have seen massive daily swings following the fragilities in the banking sector which is eroding risk-on investor sentiment. The only thing that will be fundamentally rand positive is some degree of stabilisation of the US debt market (US 10-year bond yields) and higher commodity prices. As long as the credit markets remain unstable the rand won't be able to gain from its carry trade advantage.
In summary; critical supports = 17.90 and 17.68, major resistance = 18.60 and 18.71.
March has been a very turbulent month for the local unit, but the rand is holding up relatively well in the month of March given the recent fragilities in the US banking sector. As things stand the rand has depreciated just over 1% against the dollar this month. The rand however slid to a three year low of 18.71 earlier this month but it did manage to pull the pair to a monthly low of 18.01 on the back of a broad-based weaker dollar.
Currently it seems as if the pair has completed an abc corrective pattern following the 5-wave impulse which saw the pair climb from the yearly low 16.70 to 18.71 earlier this year. In the beginning of the year, I predicted that the pair would hit the 2020 high of 19.36 in the 1H2023 (I tagged the idea in this post). I’m not prepared to stick my neck out just yet to confirm my previous idea haha however a break above the yearly high of 18.71 could confirm the move as it will signal another impulse move higher. A re-test of the pair’s 50-day MA rate currently at 17.90 is still on the cards given the down trend on the daily RSI and sell signal on the MACD. The 50-day MA coincides with the 38.2% Fibo retracement rate of 17.91 and we would need a convincing break below this level in order to invalidate the move north of 19.00. Currently the 23.6% Fibo rate of 18.22 and the neckline of the parallel channel is holding support for the pair.
Fundamentally there is not much supporting the rand. Commodity prices had a woeful first quarter off the back of the 10%+ declines in brent crude oil. Credit markets (US 10year yields) have seen massive daily swings following the fragilities in the banking sector which is eroding risk-on investor sentiment. The only thing that will be fundamentally rand positive is some degree of stabilisation of the US debt market (US 10-year bond yields) and higher commodity prices. As long as the credit markets remain unstable the rand won't be able to gain from its carry trade advantage.
In summary; critical supports = 17.90 and 17.68, major resistance = 18.60 and 18.71.
