7 March 2018

TECHNICAL STRATEGY NOTE: EQUITIES

Neels HeynekeSenior StrategistTel : +27 11 535 4041Nheyneke@Nedbank.co.za

Mehul DayaStrategy: Research AnalystTel : +27 11 295 8838MehulD@Nedbank.co.za

7 March 2018

TECHNICAL STRATEGY NOTE: EQUITIES

NEELS HEYNEKESenior StrategistTel : +27 11 535 4041Nheyneke@Nedbank.co.za

MEHUL DAYAStrategy: Research AnalystTel : +27 11 295 8838MehulD@Nedbank.co.za

7 March 2018

TECHNICAL STRATEGY NOTE: EQUITIES

Neels HeynekeSenior StrategistTel : +27 11 535 4041Nheyneke@Nedbank.co.za

Mehul DayaStrategy: Research AnalystTel : +27 11 295 8838MehulD@Nedbank.co.za

7 March 2018

STRATEGY NOTE: FX AND BONDS

NEELS HEYNEKESenior StrategistTel : +27 11 535 4041Nheyneke@Nedbank.co.za

MEHUL DAYAStrategy: Research AnalystTel : +27 11 295 8838MehulD@Nedbank.co.za

FLASH NOTE | PAGE 2

EURO-$ BULL IS LOSING MOMENTUM

Source: Reuters, Nedbank CIB Research

Source: Reuters, Nedbank CIB Research

US30YR: THE CURVE IS STARTING TO STEEPEN

• There is now near consensus that the dollar willweaken. The latest negative news around tradetariffs has however failed to weaken the dollarany further (seeing as this is now a verycrowded trade).

• However, as we reported earlier this week, weneed to be able to identify a 5-wave pattern ina dollar rally before we can call a trendreversal.

• The diverging MACD confirms the loss ofbullish momentum in the euro-$.

• The euro must now break below 1.2164 tonegate any further upside. A stronger dollarwith a rising yield curve in the US would send astrong signal that the risk-on phase is set totake a breather.

• A battle between bullish local fundamentalsand negative global fundamentals would thenunfold in the local bond market.

STRATEGY

• The US 30yr bond remains in the bear trend.We however expect the yield to break out ofthis bear trend, to rally to 3.02%, and test thetrendline through the previous highs.

• This level is also the 38.2% Fibonacciretracement of the bear trend.

• It is however the yield curve that we areinterested in. When the risk-on phase startedin 2016 this curve was trading at 88 basispoints. The curve accelerated during 3Q17,triggering an acceleration in the carry trade andin risk assets.

• The curve broke up out of this bull trend whenthe VIX accelerated, and we believe the secondwave higher is about to start. As the curvesteepens we can expect higher volatility in thebond and FX markets, as well as some profittaking coming through in the carry trade andother risk assets.

Hourly US30YT=RR, US10YT=RR 10:00 PM 2017/06/20 - 06:00 PM 2018/04/18 (EST)

2.9771

3.2159

3.2983

3.0913

BarOHLC, US30YT=RR, Bid Yield, 03:00 AM 2018/03/07, 3.1242, 3.1284, 3.1210, 3.1259Yield

Auto

2.65

2.7

2.75

2.8

2.85

2.9

2.95

3

3.05

3.1

3.15

3.2

3.25

3.1259

0.3829

0.5268

0.6185

Spread, US30YT=RR, Bid Yield(Last), US10YT=RR, Bid Yield(Last), 1.0, 1.0, 03:00 AM 2018/03/07, 0.2670Value

Auto

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.6

0.2670

23 30 09 17 2328 04 11 18 25 01 10 18 2429 06 15 22 29 051016 2330 07 14 21 29 09 17 24 31 07 14 22 01 08 1521 2804 1117Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18

Hourly EUR= 08:00 PM 2017/08/07 - 02:00 AM 2018/03/30 (GMT)

MACD, EUR=, Bid(Last), 12, 26, 9, Exponential, 08:00 AM 2018/03/07, 0.0016, 0.0018ValueUSD

.1234-0.0040-0.0030

-0.0020

-0.0010

0.0000

0.0010

0.0020

0.0030

0.00160.0018

1.2083

1.21643

4

5?

BarOHLC, EUR=, Bid, 08:00 AM 2018/03/07, 1.2424, 1.2427, 1.2411, 1.2412, +0.0010, (+0.08%)LogUSD

Auto

1.16

1.17

1.18

1.19

1.2

1.21

1.22

1.23

1.24

1.25

1.241

09 13 17 22 25 30 03 07 12 15 20 24 28 03 06 11 15 19 24 27 01 05 09 14 17 22 26 30 05 08 13 17 21 26 29 04 09 12 17 21 25 30 02 07 11 15 20 23 28 04 08 13 16 21 25 29

Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18

FLASH NOTE | PAGE 3

$-RAND: THERE SHOULD BE ANOTHER RALLY IN THE DOLLAR

Source: Reuters, Nedbank CIB Research

Source: Reuters , Nedbank CIB Research

R186: THE CORRECTION IS NOT OVER

• The $-rand also broke up out of the bear trendthat has been in place since November 2017.However, the rally failed against the necklinejust above 12.

• The correction to 11.70 is the 61.8%retracement of the rally. We expect the dollarto rally again from this level.

• If the next wave higher is equal in length ittargets a move to 12.20.

STRATEGY

• The R186 has rallied since November 2017 onthe back of a combination of bullish SA newsand an acceleration in the risk-on phase(pointed out above).

• The market broke below our extendedtechnical target at 8.07%, but has subsequentlyreversed to sell off in five waves.

• A correction cannot consist of five waves. Thisfive wave pattern is therefore just a portion ofthe expected correction phase in our opinion.

• We do not expect the market to break belowthe 8.08% neckline (and back into the originalbull trend since November 2017). If the next 5-wave pattern is equal in length, it wouldproject a move to the important support levelat 8.38%.

Hourly ZAR186= 06:00 AM 2017/12/13 - 02:00 PM 2018/03/13 (GMT)

8.383

8.279

8.466

7.893

8.082C?

3

4

5

Line from Nov 2017

1

3

4

2

5

BarHLC, ZAR186=, Bid Yield, 09:00 AM 2018/03/07, 8.110, 8.110, 8.110Yield

Auto

7.85

7.9

7.95

8

8.05

8.1

8.15

8.2

8.25

8.3

8.35

8.4

8.45

8.5

8.55

8.6

8.658.7

8.110

MACD, ZAR186=, Bid Yield(Last), 12, 26, 9, Exponential, 09:00 AM 2018/03/07, -0.020, -0.016Value

Auto-0.12

-0.1

-0.08

-0.06

-0.04

-0.02

0

0.02

0.04

-0.020-0.016

14 18 2027 03 05 09 11 15 17 19 23 25 29 31 02 06 08 12 14 16 20 22 26 28 02 06 08 09 10 13January 2018 February 2018 March 2018

Hourly ZAR=D3 03:00 PM 2017/12/14 - 05:00 AM 2018/03/22 (GMT)

MACD, ZAR=D3, Trade Price(Last), 12, 26, 9, Exponential, 09:00 AM 2018/03/07, -0.0029, -0.0068Value

Auto

-0.12

-0.09

-0.06

-0.03

0

0.03

-0.0029-0.0068

11.9043

12.538

12.1998

11.7056

BarOHLC, ZAR=D3, Trade Price, 09:00 AM 2018/03/07, 11.8225, 11.8275, 11.8075, 11.8075, +0.0250, (+0.21%)Log

Auto

11.6

11.8

12

12.2

12.4

12.6

12.8

13

13.2

13.4

11.807

15 19 21 25 27 29 03 05 09 11 15 17 19 22 24 26 30 01 04 06 07 08 11 13 14 16 20 22 25 27 01 05 07 08 09 11 13 14 15 16 19 20 21December 2017 January 2018 February 2018 March 2018

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