|
|
South Africa: The Dollar is Doggedly Refusing to Abdicate
 |
 |
|||||||||
|
||||||||||
|
|
|||||||||
|
||||||||||
Business Day (Johannesburg)
COLUMN
5 May 2008
Posted to the web 5 May 2008
Jean Temkin
Johannesburg
HIKED petrol price or not, more motorists headed for the coast over the recent long-weekend than at Easter when the oil price was 13% lower.
While no doubt there will be further increases, in our favour is the strengthening rand which, when SA came to a standstill in the middle of last week, has put on almost 8% against both the dollar and the euro in the previous six weeks.
Over those six weeks, we saw other reversals that, while as yet inexplicable, may be the prelude to a new trend.
For almost 11 months the oil price has kept pace with the gold price and see-sawed against the dollar-euro exchange rate. Then, apart from the oil price gathering steam in its upward flight, in March and April the plottings of the dollar-euro and the gold price changed direction. After spending four working days above $1000/oz, gold first plummeted, then gained a little and then continued a downward slither. From its March high, gold has lost 12%. As gold's glitter faded, it seems the dollar's fascination for traders was renewed, and it began grabbing back some of its losses against the euro.
The first upward dollar blip coincided with the gold price's initial tumble. It then cooled off with gold's slight recovery, before dollar-lovers resumed their courtship as gold lost more ground.
By the middle of last week, the dollar gained less than 2% versus the euro, but gave a buy signal with its up-flip in March when it broke upwards through its moving average convergence/divergence (MACD).
The interesting feature of the MACD break was that it took place at near the bottom of the chart.
The chart includes the MACD's horizontal line, which is its zero level. Typically this zero level is plotted at about the middle of the chart, but in the dollar's case it is well into the top third of the chart.
The last time the zero level was in the centre of the chart was early in 2005. Since then the dollar has lost 15% against the euro and the horizontal line has moved steadily upwards. While it's too early to tell whether Uncle Sam's currency will in fact dethrone the euro and resume its kingly status, charts tell me that there is an extremely outside chance that it could reach € 1/$0,88.
The rand's rise against the dollar and the euro may mean that the impression that foreign investors have of SA's economic future has warmed. The rise allows us to make a new count to about $1/R6,20 and € 1/R9,70. These would put us back to where we were towards the end of last year in the case of the dollar, and at the start of this year in the case of the euro.
A stronger rand is bad for exports but good for imports and already we are seeing resources under strain and likely to lose a little more before gaining some ground. Cycle Trends' future charts of gold and platinum hold little hope of a near-term recovery, while resources in general may lose a little more before a gradual rise. The exception is Sappi's share price which, despite Standard and Poor's outlook changing from stable to negative, has confirmed a new bull trend and given a count to R128.
Meanwhile the industrials index is gradually rising on a newly acquired bull trend.
Telecoms are looking good with MTN rising on rumours of a potential offer later denied. MTN is overbought and likely to ease. Blue Label has been in hot water of late but is rising from an oversold position while Altech's pleasing results pushed it into positive territory.
Richemont's unaudited sales for the year to March show that the super-rich continue to spend on luxury goods, particularly watches. The company has reconfirmed its bull trend, and moved back into positive territory.
While banks continue to look weak, Cycle Trends' future plotting is gently upwards. Old Mutual's repurchase of shares gave the life insurance sector a slight lift, but the indicator for the sector as a whole is sideways.
|
In media, Kagiso issued a cautionary as it is in discussions that could affect the share price. Kagiso is overbought, but has a longer-term count to R15. Naspers, with a count to R186, moved slightly better confirming a new bull trend.
Engineering shares continue to attract attention. In a bull trend that began in December, with a count to R12, Howden reached a record high but may drift slightly downwards. Hudaco is challenging some resistance at just less than R80, and must push past R81 if it is to reach its R94 count.
Jean Temkin is the author of More Charting for Profit, a textbook on technical analysis.
| |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Make allAfrica.com your home page | RSS Feed | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Top | Site Guide | Who We Are | Advertising | Search | Subscribe | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Questions or Comments? Contact us. Read our Privacy Statement. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
