Rand reversal holding up with ratings catalysts

Following on from the previous technical picture on the USD/ZAR, the reversal off resistance at R14.50/$ has held true, and the rand has continued to strengthen and move towards the guided target at R13.40. 

ZAR 29 11 2016

Strength in the rand against the U.S. dollar has been supported by the decision from ratings agencies, Fitch and Moody’s to hold their investment grade ratings on South Africa’s local currency credit. Markets will be eagerly watching the S&P ratings agency review on SA, scheduled for release on Friday the 2nd of December. Should the company decide to keep the country’s sovereign rating above sub investment (or junk) it is likely that rand strength will continue. If we consider the Fitch and Moody’s reluctance to lower their respective investment grade ratings on South Africa, it does appear to improve the probability that S&P also extend the “grace” period for SA.

Traders who have managed to catch the short USD/ZAR move might consider moving their stop level to R14.01, in the event of a close above this level.

R13.40/$ remains the initial target favoured, a break of which further favours a move to R13.19/$. 

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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.