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USDZAR Extending Lower as Major Event Risk Approaches

SOUTH AFRICA
  • As noted, this week brings two major risk events for the rand, that is the national election (May 29) and the SARB rate decision (May 30). The ruling ANC may lose its parliamentary majority but there is fundamental uncertainty around the gap to the 50% threshold and the probability of various post-election coalition scenarios.
  • Despite this, and the brief bout of mid-session rand weakness, USDZAR has returned lower and an overall bearish theme for the pair remains intact. The recent move through support at 18.4131, the Apr 9 low, strengthened this trend and signalled scope for a continuation lower.
  • Attention is on 18.1092, the Dec 15 low and a clear break of this level would open 17.9434, 76.4% of the Jul 27 ‘23 - Oct 6 ‘23 bull leg. Resistance to watch is the 50-day EMA, at 18.6128.
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