ZAR: USD/ZAR Extends Session Gains to Over 1%, Citi Enter Short ZAR Trade

Topside momentum for USDZAR accelerated this afternoon despite few obvious domestic drivers, with the move higher coinciding with the USD index reaching fresh session highs. The pair stands over 1% higher at typing, placing it within close proximity to last week’s best levels.

• Citi strategists have noted that they are entering an outright long on USDZAR via three-month forwards, as they expect the SARB to start cutting rates in September (Entry: 18.34, Target: 19.00, Stop: 18.00). They add that EM FX vol, which has struggled to retrace lower after the EM election upsets, is likely to increase as we head into the US elections.
• Despite today’s gains, the trend condition in USDZAR is unchanged and remains bearish from a technical perspective. The sell-off between Jun 6 - 21 reinforced this set-up as it resulted in a break of 18.0290, the May 21 low and a key support level. A continuation higher would refocus attention on resistance at 19.0054, the Jun 6 high.