ZAR: Rand Falls On Trade Tensions, S. Africa & US Trade Barbs Over Land Policy
USD/ZAR had a look above the 19.0 mark amid an escalation in the new US administration's combative moves on the international trade front, which included the implementation of hefty tariffs on some of America's largest trading partners and threats of more being in the pipeline. The pair last deals at 18.9320, over 2,600 pips higher on the session, with bulls looking for a break above Jan 13 high of 19.2296. This would mark a resumption of the broader uptrend. Conversely, bears keep an eye on 18.3022, the Jan 24 low.
- US President Trump pledged to end all aid to South Africa over President Ramaphosa's recent decision to sign the controversial Expropriation Act into law. This puts $440mn in US aid under threat, with a potential of a spillover into other benefits should tensions escalate, such as Pretoria's preferential access to US markets under the African Growth and Opportunity Act (AGOA). President Ramaphosa said he was looking forward to engage with the Trump administration and claimed that the only significant funding provided by the US goes towards South Africa's HIV/Aids programme.
- On a positive note, Eskom ended loadshedding after a "temporary setback" over the weekend and said that its summer outlook remains unchanged.
- SAGB yields shot higher across the curve. South Africa's 5-year breakeven inflation rate has climbed to 4.45% and the 10-year rate last sits at 5.61%.
- The composite BBG Commodity Index has added 0.8%, while the precious metals subindex has trimmed losses to last sit 0.2% lower on the session.
- Doing little to help wider sentiment, China's Caixin Manufacturing PMI unexpectedly deteriorated to 50.1 in January, missing the consensus forecast of 50.6.
- South Africa's Absa Manufacturing PMI will be published at the top of the hour.
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
