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ZAR: Rand Leads Gains Across EMEA Though Coalition Uncertainty Persists

ZAR

USDZAR has returned back towards the day’s earlier lows at around 18.70 amid a moderate fade in the USD index from its session high. The pair is ~0.9% lower today, back below the 100- and 200-DMAs, as a firmer commodities backdrop provides a tailwind to the rand.

  • Political uncertainty has kept rand volatility at elevated levels, with 1-month USDZAR implied vols seen spiking back above 16% today. The Democratic Alliance are scheduled to hold internal discussions to discuss a way forward following formal talks with the ANC over the weekend. Meanwhile, the Economic Freedom Fighters ruled out joining a government including the DA and Freedom Front Plus.
  • From a technical perspective, gains in USDZAR last week reinforced the short-term bullish theme and confirmed an extension of the reversal that started May 21. Sights are on 19.0659, the 76.4% retracement point. Initial support to watch lies at 18.4946, the Jun 3 low. Clearance of this level could signal a possible short-term bearish reversal.
     

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