The below is the daily chart of the USDZAR. Tuesday’s candle is a bullish hammer (blue candle). This is a day when sellers sold the USDZAR down until the low for the day was reached. At the low the sellers lost control to the buyers and the day ended with the buyers in control. Since then there has been bullish follow through. Incidentally, this has resulted in the next higher trough in the USDZAR’s series of higher troughs followed by higher peaks.
The uptrends momentum is defined by the green trendline and we also note that the RSI is on the bullish side of 50 (blue rectangle). It will be interesting to see if the USDZAR tests the trendline for a third time and it holds. This would, in effect, validate the trendline and may be used as a good measure in assessing an acceleration or deceleration of trend.
We again refer to the Moody’s rating’s decision at the end of this month particularly in reference to Eskom. This poses a risk to the ZAR. As recently as February 2019 Moody’s has noted that Eskom’s systems are under extreme pressure and that its reserve margin will remain tight well into the 2020s. At SONA, President Ramaphosa announced the SOE’s restructuring but there has been little news since then.
It is also likely the rating agency is monitoring the election narrative. In its latest periodic review (7th March), it makes reference to “high-level corruption.” This being the case one must question the ANC’s election list which includes names that are associated with state capture or have been found guilty of violating respective oaths of office. We continue to monitor the price action as the decision day approaches.
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