ZAR: ZAR/JPY Respects Resistance at Multi-Year High

ZARJPY is trading 0.6% lower having briefly tested the 2022 high of 8.8131 earlier in the session - a break of which would place the cross at its highest since 2018. Amid broader pressure on the EM FX basket, higher US yields and the associated greenback strength has prompted a 0.8% recovery in USDZAR, though the correction higher today is moderate compared to the ~5% sell-off this month.

• Overall, rand sentiment remains strongly positive as election uncertainty continues to fade. 1-month implied USDZAR vols have traded below 13% today for the first time since April, while 5y South African CDS are now at their lowest levels since Jan 2.
• Indeed, recent gains in USDZAR are considered corrective from a technical perspective, with a bearish threat still present. A reversion back below the May 21 low of 18.0290 would strengthen a bearish theme and could expose 17.4193, the July 27 2023 low. Meanwhile, initial resistance remains some way off at 18.5568, the 50-day EMA.