Earlier this year the South African economy sank into a recession for the first time in 8 years in the first quarter, since the last recession in 2009. The South African economy has contracted 0.7% at a seasonally adjusted rate.
In terms of the south African monetary policy, the monetary policy committee last met on the 25th of May 2017 and they left the repurchase rate at 7%. This was in line with expectations and the next meeting is on the 18th of July 2017 to the 20th of July 2017. In the May meeting the central bank revised down it’s GDP growth to 1% in 2017 and 1.5% in 2018. This shows that they aren’t too confident about the economy growing as they had thought and thus had to revise their expectations. At the May meeting they also noted the political instability that was triggered by the firing of Finance minister, Pravin Gordhan and this had deteriorated domestic growth. The central bank also highlighted the political drama and high levels of uncertainty which are of high risk and thus they will be keeping interest rates steady. MPC also mentioned that its probably the end of the tightening cycle and that a sustained improvement in inflation is needed before any rate cuts.

Inflation rates
• CPI: 5.4
• PPI: 4.8
Interest rates
• Repo rate : 7.00
• Prime lending rate: 10.5
Exchange rate
• R$ : 13.24
• R£: 17.33
• R€: 15.45
for more information visit the South African Reserve Bank Website https://www.resbank.co.za/Pages/default.aspx

South Africa GDP Growth Rate

The South African economy unexpectedly contracted an annualized 0.7 percent on quarter in the first three months of 2017, following a 0.3 percent drop in the previous period and compared to market expectations of a 0.9 percent expansion. It is the first recession since 2009 as both trade and manufacturing recorded negative growth rates. GDP Growth Rate in South Africa averaged 2.84 percent from 1993 until 2017, reaching an all time high of 7.60 percent in the fourth quarter of 1994 and a record low of -6.10 percent in the first quarter of 2009.

Source: https://tradingeconomics.com/south-africa/gdp-growth

USDZAR Weekly Chart

Some might see this chart as ranging and some might see it as a down trend that is ending and a double bottom is underway with Stochastics on its way up. Bare in mind that this is a weekly chart so our oscillator could be moving up for a very long time. As a bull on USD and a bear on ZAR i will be looking to by this for as long as possible and even holding some positions for quite some time until something changes fundamentally in the United States or in the South Africa.

USDZAR Daily Chart

Looking at the daily chart I have identified a higher low in June 2017 compared to the low of March 2017. With this being said, price has reached its monthly target for bulls so we can expect profit taking which is already quite clear. Bears who are looking for a monthly counter trend trade can wait for price to pullback up and sell a lower high down to MPP. So this could be a Short term short and a long term long. I will be waiting for price to come down to support and paying attention to price action on lower time frames looking to go long based on my bearish bias on the South African rand and Bullish bias on the US dollar. On this chart I have identified 2 levels of support which I will be watching closely. The 1st one is 13.095 and the 2nd one is 12.921


On this chart we can see that the USDZAR has been in an uptrend for the past 5 week and with price coming down to support with an oversold stochastics that could turn up, bulls are definitely paying attention.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.