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Free AccessUSD/ZAR Charts Complex Head-And-Shoulders Pattern As Hawkish SARB Sends Rand Soaring
Spot USD/ZAR has taken out several layers of technical support in the process after the SARB raised interest rates by a larger-than-expected 50bp in defiance of unanimous consensus call, with Governor Kganyago taking a dig at analysts who "will soon think like" the SARB.
- The outsized rate increase came on the back of a hawkish revision to the inflation outlook, with risks "assessed to the upside." Three out of five members voted for a 50bp hike, taking the rate to its highest level since mid-2009.
- The hawkish decision and rhetoric inspired repricing of SARB rate expectations, with the FRA curve shifting higher. 2x5 FRA vs. 3-month JIBAR spread widened to ~53bp as Governor Kganyago spoke.
- USD/ZAR has moved away from its intraday low of ZAR17.7612 and now sits at ZAR17.8471, down ~2,540 pips or ~1.4% on the session. The South African Rand sits atop Bloomberg's expanded list of 31 major currencies.
- The pair has pierced the neckline of a complex head-and-shoulders pattern, in addition to breaking below the psychological ZAR18.00 figure and the 50-DMA. Note that the pattern differs from a classical head-and-shoulders in having two heads.
- A close below the ZAR17.9949 neckline would represent an important bearish development. It would confirm that bearish momentum is gaining traction, in line with the reassessment of the SARB rate path.
Fig. 1: USD/ZAR
Source: MNI - Market News/Bloomberg
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Why MNI
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