South Africa 40 Cash Index looking bullish but inflation risks remain
The South Africa 40 looks to have set up a short-term range trading opportunity, although in lieu of high impact inflation data scheduled this week, risks thereto remain elevated.
The South Africa 40 Cash Index has continued to correct from what was previously overbought territory. The correction has been taking the form of a sideways consolidation rather than committed pullback.
The long-term trend for the index remains up, suggesting that keeping a long bias to trades is still preferable.
We have had a bullish move off the confluence of trend line and horizontal support. 75250 now becomes the target from this move. Traders who are long might consider using a close below trend line support as a trailing stop loss level for the trade.
Key data to watch
Traders will however need to consider the US Consumer Price Index (CPI) data out at 3:30pm local time. Inflation remains a key theme in markets and is likely to pose a short-term volatility risk. Should the data come in lower than expected, we expect a bullish rally to ensue. If the data is realised higher than consensus, then a breach of the guided stop level might occur.
The year on year (y/y) CPI reading is forecast to come in at 6.2% (previous 6.5%), while the month on month (m/m) figure is expected at 0.4% (previous 0.3%).
Of perhaps less consequence, but still relevant, is South Africa CPI data scheduled for tomorrow (Wednesday 15 February) at 10am.
In Summary:
Long term trend for the South Africa 40 Cash Index remains up
In the short to medium term the price trades in a rangebound environment
The price looks to have formed a bullish move off support
75250 provides the initial upside resistance target, while a trailed stop along trend line support might be considered
US CPI data out at 3:30pm (local time) provides a key risk to the success or failure of the technical assumptions
Local CPI data is also scheduled for release on Wednesday the 15th of February 2023
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