The JSE Top 40 Index Futures (JSE: J200) is currently enjoying a positive run, extending gains for the third consecutive session. This bullish sentiment aligns with recent economic data suggesting a potential slowdown in inflation. Moody’s Investors Service, however, warns that a coalition government emerging from the upcoming elections could hinder progress on resolving South Africa’s long-standing challenges.
The recent strength in the Rand against the Dollar (USD) is another positive factor. This is partly attributed to a wait-and-see approach from the US Federal Reserve regarding interest rate cuts despite elevated oil prices and concerns about global inflation. The upcoming release of US inflation data and FOMC minutes could significantly influence market direction.
A positive development for the South African economy is the upward revision of the summer harvest forecast. This reduces the risk of expensive food imports and eases pressure on domestic inflation.
Technical Analysis
The 4-hour chart shows that the index is currently trading at R70,813.46, comfortably above the 20-SMA (green), 50-SMA (blue), and 100-SMA (orange). This bullish technical posture is further reinforced by the recent 20-SMA crossing above the 50-SMA and 100-SMA, indicating a potential uptrend.
The immediate resistance level sits at R71,870.20. A significant volume breakout above this point could confirm bullish momentum, with targets at R73,081.15 and the major resistance level of R73,899.99.
Conversely, a retracement would bring the R67,640.02 support level into play. A significant volume breakdown below this level could signal bearish momentum, with potential support at R66,925.89 and the major support zone of R65,254.10.
Summary
The JSE Top 40 Index Futures are in a positive technical position, buoyed by recent gains and a potentially slowing inflation rate. The upcoming US economic data and FOMC minutes will be key drivers in the near future. A sustained breakout above R71,870.20 could lead to further gains, while a breakdown below R67,640.02 might signal a short-term correction.
Sources: TradingView, Trading Economics, Reuters, CNBC.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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