Rand resumes weakening trend

The rand has however found a further domestic catalyst to underperform its peers from domestic political developments this week. 

 While short term risk aversion relating to the trade war narrative resumes, so has the short term weakening of emerging market currencies. The rand has however found a further domestic catalyst to underperform its peers from domestic political developments this week. The African National Congress (ANC), South Africa’s governing political party has resolved that it will look to change the Constitution in lieu of pursuing land expropriation without compensation. Whether the move is political pondering ahead of 2019 elections or not, the Rand’s reaction to the news has been one of investor concern.

The below graph shows the BRICS (Brazil, Russia, India, China, South Africa) currencies performance this week, to highlight the underperformance of the Rand.

USD_Brics 02082018

Technical Trade View

The long term trend for the USD/ZAR currency pair remains up. After breaking out of a short term wedge price consolidation (blue arrow), the USD/ZAR currency pair pulled back to trend line support (circled blue) and now looks to be resuming this long term uptrend.

From a trading perspective, R13.60/$ is the favoured target from the move, a break of which further favours R14/$ as the next upside resistance target. Should the USD/ZAR instead move to close below R13.10/$ the bullish assumptions would be deemed to have failed.

Rand 02082018

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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