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The Week Ahead - USD Strength on the Cards

by , 29 September 2020
The Week Ahead - USD Strength on the Cards
The Rand weakened significantly last week as it failed to push through the R16 level against the USD.

It's now in a flag pattern, which signals longer-term weakness is on the cards. In the near term, we should see the Rand strengthen back to around R16.50.

With US elections a little over 4 weeks away, we could see general risk off sentiment as uncertainty of who will win weighs on investors.

Add to the fact that infections are spiking in the northern hemispheres as they approach winter and additional lockdowns and safe havens like the USD and Gold should see buyers come in.

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Where is the rand headed next?
 
 
 
The Rand should strengthen towards the support line of the flag pattern below R16.50 before breaking out and weakening towards R18.00.
 
This will give traders an opportunity to profit now and later. The expected strengthening is due to it being a favorable time to sell USD for Rands on the back of last week’s rapid weakness.
 
Last week’s sell off in the ZAR was a “burst of panic” and not the best time to be sending money offshore.
 
Short term Trade Idea: Short the USD/ZAR
 
Traders with derivative accounts should take an appropriate size position shorting the USD/ZAR pair for a pull back towards R16.50.
 
A stoploss at R17.25 will keep it away from unnecessary volatility and target should be R16.50.
 
Trail your stoploss lower as it breaks though the support levels of R16.90, 16.80 and R16.60.
 
Make sure to trade an appropriate size position for your portfolio.
 
NOTE: Investors looking to externalise funds should hold for a pull back before buying USD.
 
See you next week.
   
Gavin McCarter,
Contributing Editor, Money Morning
 
The week ahead:
 
Local: Unemployment Rate (29/09); M3 Money Supply, Core CPI (30/09)
 
Local Results Due: AVV, EPE, HET, REM, YRK (28/09) CIL, EPP, MIX (29/09); ACZ, CPI, ELI, GLI, MCZ, PPC, RSG, TTO, UCP, WEZ (30/09); EUZ (01/10); TLM (02/10)
 
LDT: AFX, AOX, ARI, BTI, MFL, NCS, SHP, SRH (29/09); FNB, NBS (02/10)
 
International Earnings: Micron Technology (29/09)
 
Other Economic data releases of interest…
 
Monday: ECB President Lagarde Speaks (EU)
  
Tuesday: CB Consumer Confidence (USA)
  
Wednesday: Manufacturing PMI (CNY); GDP (UK); GDP (CAN); ECB President Lagarde Speaks, German Unemployment Rate, CPI (EU); ADP Nonfarm Employment Change, GDP, Pending Home Sales, Crude Oil Inventories (USA)
  
Thursday: Tankan Large Manufacturers Index (JP); ISM Manufacturing PMI (USA); Manufacturing PMI (CAN)
  
Friday: Unemployment Rate (USA)


The Week Ahead - USD Strength on the Cards
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