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ZAR Recovery Partly Driven By CNY Consolidation

SOUTH AFRICA
BulletEM BulletEmerging Markets
  • In addition to the USD consolidation, the Chinese Yuan weakness has been driving the ZAR higher in the past ten days; the rand is among the top EM performers since the USDCNY trend reversed in mid-May, up nearly 3% against the greenback.
  • The chart below shows that the USDCNY vs. USDZAR correlations (daily returns) have been surging in recent weeks, with the 3M correl breaking above the 0.5 level to a 4-Year high.
  • However, the lack of visibility and convictions in markets could limit the upside gains on ZAR; uncertainty remains elevated and therefore could lead to a new global ‘risk off’ environment, which is usually negative for the rand.
  • USDZAR has been trending lower today, braking below its 15.6740 support (23.6% Fibo retracement of the 13.4320 – 16.3670 range) and gradually approaching its next ST support at 15.50.
  • Key level to watch on the downside stands at 15.2460 (38.2% Fibo, 200DMA).
  • On the topside, ST resistance stands at 16.

Source: Bloomberg/MNI

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  • In addition to the USD consolidation, the Chinese Yuan weakness has been driving the ZAR higher in the past ten days; the rand is among the top EM performers since the USDCNY trend reversed in mid-May, up nearly 3% against the greenback.
  • The chart below shows that the USDCNY vs. USDZAR correlations (daily returns) have been surging in recent weeks, with the 3M correl breaking above the 0.5 level to a 4-Year high.
  • However, the lack of visibility and convictions in markets could limit the upside gains on ZAR; uncertainty remains elevated and therefore could lead to a new global ‘risk off’ environment, which is usually negative for the rand.
  • USDZAR has been trending lower today, braking below its 15.6740 support (23.6% Fibo retracement of the 13.4320 – 16.3670 range) and gradually approaching its next ST support at 15.50.
  • Key level to watch on the downside stands at 15.2460 (38.2% Fibo, 200DMA).
  • On the topside, ST resistance stands at 16.

Source: Bloomberg/MNI