When in doubt, zoom out.

19 янв. 2022 г.

January closing rates to watch for the rand:
S=15.38
R=15.64

The rand is trading resiliently this week and seems to be holding the pair below the 38.2% Fibo retracement rate of 15.64 and the psychological rate of 15.50. Another weekly close below 15.38, the peak of the first wave back in Aug 2021, may invalidate the 5-wave impulse in the blue channel from May 2021 but I'd first wait for the channel to break before invalidating the EW count. A break out of this channel will allow the rand to pull the pair onto the 200-week MA rate currently around 14.90 and possibly lower into the range between 14.50 and the 23.6% Fibo rate of 14.77. Still a bit too early to predict a move back towards 14.00 though.

A close above 15.64 will keep the EW impulse wave and the blue channel in check which will be rand negative and could open the way for a move towards the 61.8% Fibo retracement rate of 17.05. The pair has however struggled to hold rates above the long-term black channel since breaking out in March 2021. The bottom of the channel may prove to be show strong resistance.

Weekly technical indicators are pointing to a stronger rand. The RSI has broken out of its downward channel and has room to move lower towards the oversold zone. The MACD indicator will produce a cross-over sell signal if the rand holds the pair to a weekly close below 15.38.

Fundamentals:
Rand positive fundamentals:
- SA's trade surplus is still sitting pretty. Oct 2021 surplus = R27.68 bn. Nov 2021 surplus = R38.53 bn.
- The SA inflation rate is still sitting in the SARB's inflation target unlike the Big boys at the Federal Reserve.
- Earlier this week the PBOC cut their policy interest rates by 10 bp's, now at 2.85%. This is positive for all commodity-currencies as it will help maintain China's commodity purchasing spree.
- The Fed will most likely also start hiking their repo rate. They however won't be able to meaningfully decrease their balance sheet (as it will crash the treasury and stock market) which will keep the yield curve suppressed. This will be positive for the rand's carry trade appeal. SA 10-year bonds yield around 9% while US 10-year treasuries (which sole buyer is the Fed) is yielding a measly 1.868%. Again, the Fed will continue to suppress the curve.
- Brent crude oil prices will continue to rise, a break above $100 per barrel is highly likely, which will be positive for commodity currencies as it will pull commodity prices up with it. The particular commodity price to watch is platinum as SA is the largest platinum exporter. Technically, it seems that platinum has made a double bottom around 910/oz.
-The two main reasons the rand sold-off so hectically at the end of 2021 was because of the implosion of the Turkish Lira and the irrational travel bans on SA after the Omicron variant discovery. The Lira is recovering somewhat and the global Covid narrative (driven by by Fauci and his compatriots in big Pharma) is crumpling and deteriorating, fast, which will hopefully keep risk-off waves from virus fears at bay. (Go watch Dr Robert Malone's podcast on the Joe Rogan Experience and read: zerohedge.com/covid-19/dr-peter-mccullough-official-covid-narrative-has-crumbled)

Rand negative fundamentals:
- SA unemployment, the forever increasing government deficit and political uncertainty are still major hurdles for the rand but these factors are common knowledge for the market and is, to a large degree, already priced in.

Monthly chart just to zoom out a bit more:
-Monthly technicals: RSI divergence and the stochastic is turning in the overbought zone, rand positive. MACD crossed to a buy signal, rand negative.