The JSE Top 40 Index (JSE: J200) experienced a notable downturn last week, plunging by 2.74% and bringing an end to a four-week winning streak. However, amidst this decline, discerning investors have seized the opportunity to buy at lower prices, leading to back-to-back days of gains.
The recent strength of the U.S. dollar, fuelled by escalating geopolitical tensions in the Middle East, has prompted investors to seek refuge in the Greenback. This surge in the Dollar’s value has been further bolstered by robust U.S. economic data and persistent inflation, which have shifted market expectations regarding the timing of interest rate cuts.
Moreover, a Reuters poll indicates a tempered outlook for South Africa’s central bank, projecting a more conservative approach to interest rate cuts this year. This adjustment, coupled with the prospect of higher U.S. yields, suggests potential challenges for South African equities, as borrowing costs may remain elevated.
Technical
The recent performance of the JSE Top 40 Index has been characterized by volatility and significant market movements, signalling a tumultuous week for investors. A strong selloff rattled the market last week, driving the index below its 100-day moving average, indicating substantial selling pressures.
Initially, support at the 65416.30 level fuelled a rally. However, this upward momentum waned as the index approached the 69968.32 mark, leading to a downturn and the establishment of a resistance level.
The depth of the market correction became evident as selling pressures intensified, causing the index to retrace to the 61.80% Fibonacci Retracement Golden Ratio. This level highlights the extent of the market’s downturn and the challenges faced by investors. Market sentiment will play a crucial role in determining the index’s direction. If sellers maintain their dominance, the 65416.30 support level may come under renewed interest. Conversely, a resurgence of upside momentum could propel the index higher, with the 69968.32 resistance level serving as a potential target for bullish traders.
Summary
In conclusion, the JSE Top 40 Index faced a challenging week, marked by a significant downturn and heightened volatility. The index’s retreat to the 61.80% Fibonacci Retracement Golden Ratio underscores the depth of the market correction. Market sentiment will be pivotal in determining the index’s trajectory, with the 65416.30 support level and 69968.32 resistance level serving as key technical levels to watch.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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