To borrow from the Alex Ferguson lexicon it is squeaky bum time for the ZAR.We have traded back down to touch the 20 month uptrend line.The move from the 9.3000 high to yesterdays low is in 5 waves and has retraced 76% of previous impulsive move.This could be the end of a flat correction .If so we need to trade impulsively above 9.1600 the previous wave 4.If we trade higher in a non impulsive 3 wave pattern and cannot surmount 9.1600 or if we break support at 8.8500 we would have to consider other possible bearish options for USDZAR.
Upon reflection I have relabelled the hourly chart to show a completed flat wave 2 correction which I think better explains the price action over last few days.The implications are the same though - a small wave 2 has probably ended yesterday and we are set to trade higher.The bigger picture shows the wedge shape of the USDZAR advance over last year or so .We are still expecting an acceleration out of the top of this wedge over the next several weeks/months
The INDI has corrected it's initial impulsive decline with a well proprtioned ABC correction to just above 61.8 fib.B took the form of a triangle.If this labelling is correct the INDI should be close to a wave 2 top .Wave 3 should take us well below the recent lows.
USDZAR has corrected into the apex of the triangle and the upper end of our buying zone. We may retrace further into the Fib zone but we consider this a buying opportunity.
USDZAR has thrust higher out of a 4th wave triangle this morning .Triangles occur in 4th waves or B waves and precede a final move in a sequence.Thrusts from triangles are almost always fully retraced .This thrust higher in USDZAR once complete should give way to a retracement at least to the apex of the triangle +-9.1500.The bigger picture is for a weaker ZAR though and we will use this pull back to reinstate long USDZAR positions
USDZAR looks to be correcting its initial impulsive move higher .Looking to buy into any weakness into Fib area 9.0000-9.1000 . Risk management level 8.8500 and we are still targeting 10.3000-10.5000 over coming months .
USDZAR traded very heavy last week but still held support line .We think it may be the 'release valve' for the pressure in the commodity and equity markets. 9.2000 first resistance.Support at 8.8500 should go untested under this scenario.
It looks like we may have completed a 4th wave correction at yesterday's highs .A break of 34200(cash) 34400(futures) would likely confirm this top.Downside Fib targets start at 33300 and extend to 32600 (basis cash).
It has been one way traffic for USDZAR the last week which has brought us back to its up trend line.Media coverage on the ZAR last month was dominated by the huge Current Account deficit and it's bearish implications for the ZAR. On cue USDZAR topped at 9.3600.This weeks currency news has been dominated by the BOJ quantitative easing and it's bullish implications for EM currencies including the ZAR.Will USDZAR oblige and bottom with this positive news ? Daily stochastics are deeply oversold and we are back at trend line support.A close back above 9.0000 would be the first indication of some sort of low.
Today's marginal new low in the Top 40 cash was probably a B wave of and ongoing 4th wave correction. ALSI futures did not register a new low there by creating a near term divergence .Added to that we had expanding breadth relative to Fridays low.Both momentum and volume indicators also did not make new extremes.If a triangle is in play we will have a few more sessions of sideways trading between 34235 and 33776 (basis cash) before we trade lower .If a flat is in play we will trade above 34235 (possibly towards 34500 ) before turning lower.
First real panic selling in the ALSI for a long time seen today.We are possibly finishing up a 3rd wave here and we have lightened up on our short positions going into the weekend.
Waning momentum and whats looks like a completed corrective bounce leaves us negative on CFR with a risk management level at 75.25
The late afternoon fall in ALSI futures reinforces our contention that we are falling in a 3rd wave which should take us to at least to 33912 (basis cash) where wave 3 =1.618*wave 1 .Coincidentally this is the area of the lower trend line of a broadening top formation.breadth was very negative at the close with MTN and SHP the only shares in TOP40 eking out a gain.
If the labels on this chart are correct bounces in the ALSI will be shallow and we will accelerate lower over coming days
USDZAR has traded choppily higher over the last year or so.The pattern is not to dissimilar to the pattern seen in the 1st half of 2001.USDZAR exploded higher out of that pattern and we believe it will do the same again once its current pattern exhausts.We are buyers on dips and believe this current dip maybe the last one before upside acceleration .The dip has been very shallow (one would have expected a deeper move into the 9.0000-9.1400 fib zone)Perhaps the shallowness of the retracement is a sign of the weakness of the ZAR .Regardless once this consolidation completes we expect a fast move towards 10.5000.
In our opinion the the ALSI is over loved and over owned.Market participants are conditioned to buying any weakness in the stock market .This strategy has payed off handsomely over the last 4 years so why change?!As a result of this general mindset positioning and sentiment are flashing warning signs in addition to waning momentum.Most importantly the wave structure is arguing for a top.We are immediately bearish with a risk management level at last weeks high of 35840 cash and 36110 future.A break of 34575 (cash) would open up a double top target of 32560 but we are ultimately targeting +- 29200 being the apex of the 4th wave triangle.
