Forex Morning Commentary 28th January 2009

Forex

Gut Feeling

The ZAR is still holding up well as the US$ comes under pressure. The appetite for risk aversion has risen as the markets bounced back overnight. 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 still 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 and it seems that the moves are a bit more even. 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       14.1850/14.2050

ZAR / JPY       8.8838/8.9038

EUR / USD      1.3250/1.3260

GBP / USD      1.4267/1.4277

USD / JPY       89.19/89.29

Morning Commentary