Rand Struggles For Clear Direction Amid Firmer Yuan, Worse Energy Situation

Spot USD/ZAR operates near unchanged levels, last at 18.4967, with the pair unwinding its overnight downtick. Bears look for losses past Jun 27 low of 18.4310 and towards Jun 16 low of 18.1250, a key support level. Bulls see Jul 7 high of 19.1533 as their initial target.

• Continued yuan appreciation may have been spilling over into the rand this week, with the redback benefitting from a string of firmer-than-expected PBOC mid-point fixings as well as rumours surrounding the potential for Chinese fiscal stimulus. More supportive policies in China would bode well for demand for South African commodities from its top trading partner.
• South Africa's power cuts continue to deteriorate, with Eskom ramping up outages to Stage 6 for the first time in more than a month. The utility will now alternate between Stages 4 and 6 until further notice. Worsening energy situation may be limiting the upside for the rand.
• SAGBs are a tad firmer at typing, with 10-year breakeven inflation rate down 2bp to 6.75%. The commodity complex remains afloat, despite trimming earlier advance, while BBG precious metals subindex sits ~0.2% higher on the day.