Forex market trend analysis
- ZAR under extreme pressure ,and risk volatility remains high
- Greece playing havoc with markets, Asian/Aussie markets all down
- Chinese looking to stabilize growth in their country
The rand was firmer today as a Greek poll over the weekend showed more support for austerity and therefore staying in the euro zone. Initially the political parties supporting austerity had close to 80% of the seats in the Greek Parliament, but this fell to only 30 percent after the elections. The failure to form a coalition government means that another election will be held on June 17. The ZAR will be under extreme pressure over the next week or so with the Greek debacle still the talk of the market. The uncertainty has caused risk aversion to take place and a flight into safer investments has and will take place. Standard Bank said there was scant support for markets from the G8 summit, with little discussion on the Euro zone debt crisis. Leaders have expressed support for Greece remaining in the euro zone, but their lack of any firm commitment or new steps aimed at stemming the unfolding crisis, have left markets unmoved and nervous. The focus is likely to remain on Europe for another week, with developments in Greece of particular concern. Greece cannot stay part of the Euro zone and still expect ECB bail-outs if you will not institute austerity measures to curb spending. Risk will remain off for a while and we will have pressure and volatility in the rand market. We can only advise our clients to stay hedged in these uncertain markets, especially the importers. Once we have certainty around Greece, and this will probably not come with next month’s Greek elections, Global markets and the rand should stabilize and we may resume the stronger rand environment of the previous view years. The market is very jittery right now, so the flight is into safe havens such as the US dollar and Swiss Franc, who are the benefactors at present. We must watch the Euro as I have been bleating on now for ages that the sovereign debt issue is nowhere near over. My view is we will be at these levels for a few days. Trading range for me 8.02-8.50.Exporters must take advantage of these rate and % sell their proceeds as the ZAR gets weaker. They should also put a stop 8.000 if the ZAR regains some of its losses. This will eventually transpire as what goes up must come down.
Concerns about Spain’s banking system and political chaos in Greece are taking a toll on the Euro, with the net shorts in the common currency shooting up to record highs. The Yen dropped versus all of its counterparts on speculation the bank of Japan will add to stimulus measures this week to support growth and weaken the nation’s currency. World leaders confirmed their interest in Greece remaining in the Euro zone at a meeting of the group of eight leaders on Saturday, but they also stresses the need for the debt-stricken nation to uphold its financial commitments.
The weekend was marked by some positivity from the Chinese Premier Wen Jiabao as he said that stabilizing growth is the top of the Chinese agenda. In comments which are leading to speculations that a rate cut might come about sooner than later, Chinese Premier stressed the importance of adjusting policies decisively to prevent rapid economic slowdown of Chinese economy. According to him, “No matter the fiscal policy or the monetary policy, we cannot afford to wait and see and miss the right timing,” he said in a state radio broadcast Sunday. “We must implement the policies in a timely manner if we believe they’re right.”