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Large Bund downside

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  • USD/ZAR trades +0.42% higher around the open, tracking weaker risk sentiment out of APAC this morning as equity indices continue to slide.
  • The cross ended a fraction lower yesterday after attempting to breach the 15.00 handle for the first time since March.
  • Dollar weakness helped the cross settle lower to form a bearish gravestone doji candle on the daily, but managed to close above the 200dma.
  • Markets paid little attention to the conclusion of the public sector wage deal, which is a notable for govt and the fiscal consolidation push.
  • Focus, however, remains on the FOMC with markets expecting a mostly neutral response from the Fed with Citi looking to fade moves higher in the USD into and after the meeting.
  • 15.00 remains the key level to watch in the cross – opening up 15.30 & 15.50 to the topside.
  • Strong bond market activity yesterday was ZAR supportive, but will need to be monitored for longevity.
  • Wider real yields on falling inflation keeping real yields/carry differentials attractive.
  • Intraday Sup1: 14.7583, SUP2: 14.6577, Res1: 14.9957, Res2: 15.2031