Charts Of The Day: An eye on exotics

Market Analysis / 4 Min Read
Milan Cutkovic / 03 Jun 2021

Highlights:

  • Interest rate cut call sends Turkish Lira tumbling to a fresh low against the US Dollar
  • Despite the South African economy’s continued struggles, the ZAR remains in demand
  • Coffee´s rally may run out of steam in the short-term
  • Natural Gas failed once again to break resistance, as traders continue to bet on a range-bound market

Turkish Lira

In FX, the focus today was on the Turkish Lira. Turkish President Erdogan called for lower interest rates despite an uptick in inflation, sending the lira tumbling to a fresh low against the US Dollar. While the central bank pushed back against expectations of an imminent rate cut, the damage has already been done and USD/TRY is likely to rise further in the near-term.

Imminent support is seen at 8.5065 – a former key resistance level – where buyers are likely to emerge again in larger numbers, as well as the rising trendline from the late March low. To the topside, the recent high at 8.7963 remains the main obstacle for TRY bears.

South African Rand

Meanwhile, the South African Rand remains in demand and the currency rallied to a fresh two-year high against the US Dollar. The South African economy continues to struggle, but the ZAR has been benefiting from rising commodity prices and broad risk appetite.

USD/ZAR has been in a strong downtrend for over a year and there are no signs of an imminent reversal. The daily RSI has entered oversold territory, which increases the risk of a short squeeze in the near-term. However, any larger rally is likely to attract further selling interest. Resistance is seen at 13.67, followed by the falling trendline from the April high and the major resistance zone between 13.81 and 13.88.

Coffee

Coffee´s rally might run out of steam in the short-term, with negative RSI divergence on the Daily chart hinting at an imminent pullback. The price action in the past two trading days is supporting this, as the commodity saw wild price swings, but failed to advance further.

Nevertheless, with the broad uptrend intact, buyers are likely to emerge in the support zone between $155.30 and $157. A clear break below the former level could signal the beginning of a deeper correction, but given the current fundamentals, the odds of that happening appear rather low.

Natural Gas

Meanwhile, Natural Gas failed once again at $3.145 resistance, as traders continue to bet on a range-bound market. Support is seen at 3.04, and a break below this level could pave the way for another test of the 2.87/89 support zone.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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