Rand Report

The rand has found some short term reprieve over the last few days, although appears to remain on a weakening trajectory in the medium to long term.

While domestic catalysts including weak GDP, a rate cut and a widening current account deficit have contributed to the local currency softening this year, the depreciation has followed risk off sentiment which has seen emerging market asset classes mostly under pressure as well. External narratives which have contributed to the moves include: diminishing carry trade opportunities as the US, European and British central banks adopt a more hawkish stance on monetary policy and trade war tensions which continue to threaten the state of global economic growth.

The below graph illustrates the currency performances of the dollar against BRICS nations (Brazil, Russia, India, China and South Africa) for both the Quarter and Half Year ending 30 June 2018.

The Rand

The trends for the rand against its developed market peers are suggesting continued weakness to come. The USD/ZAR, EUR/ZAR and GBP/ZAR pairings highlight these weakening trends as the currencies trade above the 20, 50 and 200 day simple moving averages (MA’s).

USD/ZAR

The trends for the rand against its developed market peers are suggesting continued weakness to come. The USD/ZAR, EUR/ZAR and GBP/ZAR pairings highlight these weakening trends as the currencies trade above the 20, 50 and 200 day simple moving averages (MA’s).

EUR/ZAR

GBP/ZAR price set up is slightly to the EUR/ZAR and USD/ZAR currency pairs, in that there is a clear short term consolidation in the form of a triangle. Should a break above the R18.30/GBP manifest, R18.90/GBP would be the favoured resistance target from the move. In this scenario, a close below triangle support at R17.95/GBP may be used as the failure level for the trade. Only if the R17.75/GBP level is broken (with a close) would we consider the short term trend to be changing direction.

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