Forex Morning Commentary 26th January 2009 

Forex

Gut Feeling

The ZAR was under a lot of pressure on Friday all day, as the rate topped the 10.30 level, even after that the ZAR held up well despite a strong USD $ and slipped back above the level of 10.15. I have said on many occasions that with the turmoil in the market - why is the USD $ a safe currency in this day and age. Maybe the time is coming as is evident with the Gold price near US$ 900.00 per ounce, where commodities will become safe haven in place of the US $. I till think the level of 10.25 is a psychological barrier and needs to be broken decisively for any further ZAR weaknesses. I must also say that I am not looking for a huge correction and think today the ZAR will remain under pressure. If the ZAR struggles to go weaker the long position will be reversed taking the ZAR back to the 9.75 level. The ZAR will remain on the back foot, for as long as we have the huge trade deficit. The trading range once again for the ZAR seems to be 9.75 to 10.40. It is still a bit premature to turn positive on the ZAR as there is still a lot of uncertainty in the global market. A rate cut is on the cards and market sentiment is a 50 bp cut. Any bigger cut would affect the foreigners to look at investing into South Africa, which in turn would assist our trade deficit. A cut contrary to the past of weakening the currency would strengthen as the market interprets it as a stimulus for the economy.

Data Releases

Wednesday        SA CPI, CPIX, CPI Core

Wednesday        US Fed Rate

Thursday           SA M3, PSCE, Trade Stats

Friday               US GDP, NAPM

Rates

USD / ZAR       10.2400/10.2900

EUR / ZAR       13.2500/13.3000

GBP / ZAR       13.9720/13.9920

ZAR / JPY       8.6482/8.6982

EUR / USD      1.2917/1.2927

GBP / USD      1.3613/1.3713

USD / JPY       88.79/88.89

Morning Commentary