Withdrawal of “a” the Land Expropriation Bill

Recent news that parliament was withdrawing a land expropriation bill, saw a knee jerk response from the currency.

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The rand has highlighted its potential for volatility from a number of catalysts as of late, both international and domestic.

Recent international catalysts for Rand weakness have been related to sympathy with emerging market peers (such as Turkey’s and its current economic crisis), the US China trade war rhetoric, as well as a Tweet or two from US President Donald Trump (relating to land expropriation in South Africa).

Withdrawal of “a” the Land Expropriation Bill

Land expropriation has become a dominant domestic theme reflected in the movement of the rand as of late. Recent news that parliament was withdrawing a land expropriation bill, saw a knee jerk response from the currency, as it strengthened briefly before resuming its weakening trend. Short term strength in the rand was perhaps from the perception that the ANC was recanting its decision to amend the constitution for land expropriation “without compensation”. However, this is not the case, as the withdrawal is rather for a bill passed in 2016, where the state was allowed to expropriate land with a “forced compensation”. The investigation into the amendment of section 25 of the constitution remains on the cards.

Technical View

USD/ZAR

The uptrend for the USD/ZAR remains (dollar strength/ rand weakness). In the near term we have seen the R14/$ mark as an area of accumulation, as the price has twice found support here (marked with arrows on chart) before resuming its uptrend. The recent retest of this level (marked with the blue arrow) has seen the USD/ZAR moving into oversold territory. The oversold signal supports the price reversal at this support level, and is considered technically bullish. With this in mind continued gains for the USD/ZAR are expected with R15/$ the initial upside target, a break of which further favours a move to the next level of resistance at R15.65/$. Should the price instead move to close below horizontal support (R14/$), then the upward trend line becomes the next level of support considered and possibly another point of consideration for a long entry into the USD/ZAR currency pair.

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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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