Forex Morning Commentary 27th January 2009

Forex

Gut Feeling

The ZAR has held up well despite a strong USD $ and slipped back above the level of 10.05.The appetite for risk aversion has risen as the markets bounced back overnight. 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 getting some of its glitter back and reaching US$ 916.00.00 per ounce. I till think the level of 10.25 is a psychological barrier and needs to be broken decisively for any further ZAR weaknesses. If the ZAR struggles to go weaker the long position will be reversed taking the ZAR back to the 9.75 level and stop losses will be triggered causing ZAR to go stronger. 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       9.9865/10.0565

EUR / ZAR       13.1738/13.2038

GBP / ZAR       14.0525/14.1025

ZAR / JPY       8.8838/8.9038

EUR / USD      1.3186/1.3196

GBP / USD      1.4050/1.4060

USD / JPY       89.34/89.44

Morning Commentary