Final stretch for 2024
Updated
The rand rode a wave of both local and international positive factors through the year. The local election results along with the new GNU attracted buyers back to the SA bond market in the first half of the year while internationally, sustained risk-on sentiment from the Fed’s aggressive 50bps rate cut in September and a 30% Bull Run in gold prices allowed the rand to pull the pair from a high of 19.35 in February down roughly 12%, to a 20-month low, of 17.02.
Gold prices are however coming off their highs of $2,780 per ounce while the DXY has surged roughly 6.5% since the end of September which is bucking the downward trend for the USD/ZAR trend. This has seen the rand become worst performing currency against the dollar post the US election results after the volatile ZAR slipped almost 6%.
The pair now seems to be in a 5-wave impulse that was initiated at the end of September which coincides almost perfectly with the DXY bottoming out around 100.2. The positive correlation between the DXY and USDZAR has strengthened post the US election which will keep the rand on the ropes as we enter the last stretch of 2024.
The pair is however facing strong resistance on the 200-day MA level of 18.27 and the 61.8% Fibo retracement of 18.43 which will allow the rand to pull the pair back towards the support between 17.88 and 18.00. A failed break below this blue support range will confirm the 5-wave impulse which could see the rand buckle to north of 18.50 as we head into 2025.
Fundamentals: The declining gold price is rand negative however the risk-on sentiment in the market remains prevalent given the price action in risk assets such as equities (specifically tech stocks) and bitcoin. The rand has not been able to benefit from this risk-on sentiment which is not a positive sign. The Federal Reserve is expected to through another rate cut into the mix before year-end as well as the SARB and in terms of monetary policy, I expect the SARB’s hawkish stance to limit the rand’s losses for now. Zooming out, the pair remains in a downward trend shown by the black channel.
Gold prices are however coming off their highs of $2,780 per ounce while the DXY has surged roughly 6.5% since the end of September which is bucking the downward trend for the USD/ZAR trend. This has seen the rand become worst performing currency against the dollar post the US election results after the volatile ZAR slipped almost 6%.
The pair now seems to be in a 5-wave impulse that was initiated at the end of September which coincides almost perfectly with the DXY bottoming out around 100.2. The positive correlation between the DXY and USDZAR has strengthened post the US election which will keep the rand on the ropes as we enter the last stretch of 2024.
The pair is however facing strong resistance on the 200-day MA level of 18.27 and the 61.8% Fibo retracement of 18.43 which will allow the rand to pull the pair back towards the support between 17.88 and 18.00. A failed break below this blue support range will confirm the 5-wave impulse which could see the rand buckle to north of 18.50 as we head into 2025.
Fundamentals: The declining gold price is rand negative however the risk-on sentiment in the market remains prevalent given the price action in risk assets such as equities (specifically tech stocks) and bitcoin. The rand has not been able to benefit from this risk-on sentiment which is not a positive sign. The Federal Reserve is expected to through another rate cut into the mix before year-end as well as the SARB and in terms of monetary policy, I expect the SARB’s hawkish stance to limit the rand’s losses for now. Zooming out, the pair remains in a downward trend shown by the black channel.
Trade active
The pair has entered the support range quite aggressively yesterday off the back of an S&P rating upgrade. The latest SA CPI figures will be released today in the lead up to the SARBs rate decision on Thursday.
A break below 17.80 and 17.75 will invalidate the idea
Trade closed: target reached
The non-farm payrolls print last week was a non-event however it did come in stronger than expected which is dollar positive in my opinion. This week the US CPI for Nov will be released on Wednesday and anything inline or above expectations will put another gust of wind in the dollars sails.
I'm planning to pull the trigger on the idea this week. Buy orders between 17.95 and 17.85. Stop loss around 17.75 and 50-day MA at 17.70.
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