At the end of October, the USD/ZAR closed at 13.8215 and in less than a month moved to a new historical high of 14.44, a roughly 4.5% move. This weekend’s events in Paris does not bode well for an already fragile currency given the broad based global USD strength resulting in part due to a flight to quality.
The probability of a US rate hike in December remains an overall concern and more specifically, all eyes will be on the tone of tonight’ s FOMC’s minutes. If it leans towards an increase in expectations of a hike we could expect the ZAR to react in line.
A test of this weeks 14.44 against the greenback will be carefully monitored as honestly we will be in a bit of no-mans land on a technical basis. Further weakening of the ZAR is to be expected especially if local rate hike expectations continue to fade ahead of the South African Reserve Bank’s MPC meeting tomorrow.
Though the ADX has turned slightly negative, the 20-day SMA is still comfortably above the 50-day leaving us to believe this upward trend have not seen its end.