Davion Delmonte Jr.
JF-Expert Member
- Oct 27, 2013
- 2,149
- 1,717
I. Technical Analysis on weekly chart.
Technical analysis summary
The weekly price chart technically shows a very huge potential USDTZS pair to correct the upward bullish rally that started with wave 1 about ten years ago.
The price finalized the impulse wave 5 last year with the price reached above 2300 and established a very important supply zone.
The completion of wave 5 means the price was in its way to retrace back to correction that will implies the movement of price down to wave ABC to end at the strongest demand zone of price around 1500 that existed between 2012 and 2013.
The shilling which is currently trading above 100 week moving average price which implies that the pair is in over-bought and over-valued. Hence when price cross EMA100 complete corrective wave A, it will be a justification for long bearish rally for USDTZS pair.
According to this analysis the potential wave C will finalize between year 2019 and 2020.
Supporting this technical analysis, here, we consider some fundamental events for Tanzania which are the one responsible for building this bearish corrective rally of USDTZS to where we have put our estimates.
II. Fundamental events that may change the trend to wave ABC
1) Oil and gas economy- more capital inflow in form of investment to the sector from abroad.
2) Booming of tourism industry. There is a potential improvement of tourism with main competitor Kenya in general election in 2017 that will de-stabilize the country. Tanzania is expected to gain much from this shift and there is an expectation for more income to flow that will push the value of our currency higher against dollar.
3) Positive economic outlook for Tanzania. Our economic growth is destined to continue performing at a wonderful rate. And with a strong economy the relative value of our currency will continue to perform better.
4) Mega infrastructure projects.
- Uganda oil pipeline to be completed before 2020. Will bring inflow of about 4 billion USD.
- Railway project to Rwanda will also inject a lot of money as inflows to our economy.
- The impact of both projects and other projects planned to be implemented is that they will result to more dollars in the economy that will ease drop the price of dollar and subsequently increase in the value of TZS.
5) Potential expansion of activities at DSE that expands the edge for foreign investors to flow capital to our economy.
- The increase in the number of IPO’s
- The ongoing establishment of commodity exchange will spur more activities of investment.
6) Ongoing measures to increase net export parameter (X-M),
- Adoption of quota to encourage domestic production. Ie. Sugar. Though currently it seems as a failure but in one to three years this will effect handsomely.
- Restrict importation of second hand commodities ie. Mitumba, also will encourage domestic production.
- Inflow of foreign companies as offshores. The move by TOYOTA will be followed by other companies as Tanzania continue to be the hub big market to some highly demanded commodities like Cars, phones, electronics equipment.
- Government initiation to promote industrialization. CCM election manifesto of 2015.
- All of these actions over few years to come will have huge impact to our trade balance. From the status quo of being net importer to a net exporter as there will be huge drop of import and the subsequent increase in exportation due to the expansion of domestic production as a result of those policies. The positive net export is interpreted as capital inflow which is the primary cause for appreciation of our currency.
7) Good governance that fights corruptions continue to enhance openness and ease of doing business that is all good for an economy. The incumbent leader ‘The Bulldozer” John P. Magufuli has shown seriousness in that matter and this is all good and credit to our economy and currency in few years to come. More grants and aids from abroad will flow in his administration and this has the same effect as capital inflow.
8) Potential high interest rates. It is a de-facto, Tanzania has highest interest returns as measured by bond yields and commercial banks fixed deposits as compared neighboring countries. This will give Tanzania an edge to attract “higher return seekers investors” with huge capital from abroad. With more capital flowing to our financial sector the demand for shilling will skyrocket and so its value.
9) Macro-economic adjustment, with potential increasing in economic growth, employment will go up too and the general price levels. With that circumstance the Bank of Tanzania in the future will have to cool the situation by increasing its ‘Bank rate’ so as to cool the economy and lowering prices. Those actions will continue raising overall interest rates existing in our economy and continue make the shillings expensive and appreciate in value. ====> Tanzanian shilling could be up for correction against USD - BongoTabloid
Cc. Bavaria
Technical analysis summary
The weekly price chart technically shows a very huge potential USDTZS pair to correct the upward bullish rally that started with wave 1 about ten years ago.
The price finalized the impulse wave 5 last year with the price reached above 2300 and established a very important supply zone.
The completion of wave 5 means the price was in its way to retrace back to correction that will implies the movement of price down to wave ABC to end at the strongest demand zone of price around 1500 that existed between 2012 and 2013.
The shilling which is currently trading above 100 week moving average price which implies that the pair is in over-bought and over-valued. Hence when price cross EMA100 complete corrective wave A, it will be a justification for long bearish rally for USDTZS pair.
According to this analysis the potential wave C will finalize between year 2019 and 2020.
Supporting this technical analysis, here, we consider some fundamental events for Tanzania which are the one responsible for building this bearish corrective rally of USDTZS to where we have put our estimates.
II. Fundamental events that may change the trend to wave ABC
1) Oil and gas economy- more capital inflow in form of investment to the sector from abroad.
2) Booming of tourism industry. There is a potential improvement of tourism with main competitor Kenya in general election in 2017 that will de-stabilize the country. Tanzania is expected to gain much from this shift and there is an expectation for more income to flow that will push the value of our currency higher against dollar.
3) Positive economic outlook for Tanzania. Our economic growth is destined to continue performing at a wonderful rate. And with a strong economy the relative value of our currency will continue to perform better.
4) Mega infrastructure projects.
- Uganda oil pipeline to be completed before 2020. Will bring inflow of about 4 billion USD.
- Railway project to Rwanda will also inject a lot of money as inflows to our economy.
- The impact of both projects and other projects planned to be implemented is that they will result to more dollars in the economy that will ease drop the price of dollar and subsequently increase in the value of TZS.
5) Potential expansion of activities at DSE that expands the edge for foreign investors to flow capital to our economy.
- The increase in the number of IPO’s
- The ongoing establishment of commodity exchange will spur more activities of investment.
6) Ongoing measures to increase net export parameter (X-M),
- Adoption of quota to encourage domestic production. Ie. Sugar. Though currently it seems as a failure but in one to three years this will effect handsomely.
- Restrict importation of second hand commodities ie. Mitumba, also will encourage domestic production.
- Inflow of foreign companies as offshores. The move by TOYOTA will be followed by other companies as Tanzania continue to be the hub big market to some highly demanded commodities like Cars, phones, electronics equipment.
- Government initiation to promote industrialization. CCM election manifesto of 2015.
- All of these actions over few years to come will have huge impact to our trade balance. From the status quo of being net importer to a net exporter as there will be huge drop of import and the subsequent increase in exportation due to the expansion of domestic production as a result of those policies. The positive net export is interpreted as capital inflow which is the primary cause for appreciation of our currency.
7) Good governance that fights corruptions continue to enhance openness and ease of doing business that is all good for an economy. The incumbent leader ‘The Bulldozer” John P. Magufuli has shown seriousness in that matter and this is all good and credit to our economy and currency in few years to come. More grants and aids from abroad will flow in his administration and this has the same effect as capital inflow.
8) Potential high interest rates. It is a de-facto, Tanzania has highest interest returns as measured by bond yields and commercial banks fixed deposits as compared neighboring countries. This will give Tanzania an edge to attract “higher return seekers investors” with huge capital from abroad. With more capital flowing to our financial sector the demand for shilling will skyrocket and so its value.
9) Macro-economic adjustment, with potential increasing in economic growth, employment will go up too and the general price levels. With that circumstance the Bank of Tanzania in the future will have to cool the situation by increasing its ‘Bank rate’ so as to cool the economy and lowering prices. Those actions will continue raising overall interest rates existing in our economy and continue make the shillings expensive and appreciate in value. ====> Tanzanian shilling could be up for correction against USD - BongoTabloid
Cc. Bavaria
