Key Technical Level Gives Way With Eskom Crisis Exacerbating Rand Sell-Off

Spot USD/ZAR has accelerated gains on the back of a clean technical break above Jan 6 high of ZAR17.4343, with the Rand coming under pressure from reports suggesting that South Africa considers declaring a national state of emergency over its escalating energy crisis.

• The ZAR has been weighed on by intensified power rationing that the SARB said might shave 2 percentage point off South Africa's GDP growth this year. Despite the urgency of the problem, there are no near-term solutions to the crisis in sight, with Eskom estimating that it could take around two years to end load-shedding.
• Spot USD/ZAR last changes hands at ZAR17.4594, ~590 pips higher on the session, with bulls now looking to test Dec 13 high of ZAR17.7601. Conversely, bears eye Jan 12 low of ZAR16.6950 for initial support.
• The aggregate BBG Commodity Index last operates ~0.9% worse off amid pre-Fed caution, with the precious metals subindex ~1.2% below neutral levels, which might be adding pressure to the ZAR.
• Local-currency bond yields have dropped across the curve. South Africa's 10-year inflation breakeven rate sits at 5.92%, close to the recently printed one-year lows.
• The focus turns to South Africa's December trade data and domestic political developments, with the expected Cabinet reshuffle likely to take shape in the coming days.