The JSE Top 40 Index Futures (JSE: J200) are navigating a confluence of factors impacting the South African economy and investor sentiment. The upcoming national elections on May 29th, 2024, are a key focus, with polls indicating a potential historic shift as the ruling African National Congress (ANC) might lose its parliamentary majority for the first time since 1994. This political uncertainty is likely to inject volatility into the market.
Adding to the complexity is the South African Reserve Bank (SARB) interest rate decision scheduled for Thursday, May 30th, 2024. The decision comes on the heels of a recent uptick in the South African rand, but inflation remains a concern, potentially influencing the SARB’s stance. Overall, market participants are cautious as they await election results and the central bank’s monetary policy direction.
Technical Analysis
The index is currently trading at R72,768.56, attempting to extend a bullish move after a recent break below an ascending channel. While the price action sits below the 20-period Simple Moving Average (SMA) (green line), it remains comfortably above the 50-period SMA (blue line) and 100-period SMA (orange line). This indicates a potential uptrend bias despite the short-term dip.
The Relative Strength Index (RSI) at 49.33 suggests neutral momentum after dipping below 50. A sustained break above the 20-SMA (R73,899.99) on significant volume could confirm bullish momentum. This might lead to a test of higher resistance levels at R74,871.95 and R76,000.00.
Conversely, a sustained retracement below the 50-SMA (R71,306.49) would expose the index to a potential downside. A significant volume drop breaching this initial support could open the door for further bearish moves towards R69,849.23 and R68,397.15.
Summary
The JSE Top 40 Index Futures (J200) face a wait-and-see approach due to the upcoming elections and interest rate decision. The technical picture shows a potential tug-of-war between bulls and bears. A confirmed break above the 20-SMA could trigger a bullish surge, while a drop below the 50-SMA might expose the index to further downside.
Sources: TradingView, Trading Economics, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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