The Rand has staged a stellar rally. Strengthening from above R15 against the USD to below R13.90. It came within half a cent of our R13.8550 target against the USD but the price is consolidating. It's time to bank our profits after a 6.24% gain, with gearing your gain could have been more than ten times larger.
Trading the other way and going long the USD against the ZAR has good risk to reward metrics. With Thursday's expected rate cut we should see some ZAR weakness. A reduction in interest rates is generally negative for a currency.
If we also get some negative earnings surprises globally, investor sentiment might wane considering slowdown fears, this will see a risk of trade affecting the ZAR. American earnings season unofficially kicks off with the major US banks this week.
Look at the chart below and see how the USD/ZAR pair is consolidating around the R13.90 level. The R13.90 level is a strong support level. The R13.60 level (indicated with the green line) is the upper resistance level that we will be targeting on our long.
Go long the USD/ZAR at R13.90, stop loss is a daily close below R13.80 with a target of R14.55.
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The week ahead:
• Local: Manufacturing: Retail trade sales (17/07); SARB rates decision (18/07)
• Results Due: SBV (19/07)
• LDT: AFH, AFH, DTA, IBRP1, LEW, NCS, PMV (16/07)
• Special/Share Premium Dividend (16/07): STX40, STXDIV, STXFIN
Other Economic data releases of interest…
• Monday: Empire State Manufacturing Index (USD); CPI (NZL); Monetary Policy Meeting Minutes (AUS)
• Tuesday: FOMC Member Bowman & Evans Speaks, Core Retail Sales, Fed Chair Powell Speaks (USA); Average Earnings Index (UK); German ZEW Economic Sentiment (EU)
• Wednesday: Building Permits (USA); CPI (UK); CPI, Manufacturing Sales (CAN); Unemployment Rate (AUS)
• Thursday: Retail Sales (UK); Philly Fed Manufacturing Index, FOMC Member Williams Speaks (USA)
• Friday: FOMC Member Rosengren Speaks & Bullard (USA); Public Sector Net Borrowing (UK); Core Retail Sales (CAN)
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