Some of the main drivers in the currency market at the moment are the US Fed and European Central Bank monetary policy announcements due later this week.
Rising expectations that the European Central Bank will cut rates further, with a few expecting the ECB to take action as early as its Thursday meeting.
Uncertainty on Fed policy regarding the reduction in the US bond-buying program is continuing to spook the global markets, as such a risk-off attitude is currently at play in the global markets. South Africa, along with several other developing nations, is experiencing a heavy sell-off in the Rand.
On the local front the ZAR is also being weighed down by continuing industrial action and uncertainty over the investment policy and environment in the country coupled with a large and growing current account deficit.
Our technical analysis views are as follows. A break above 16.43 is a key technical break which should see further ZAR weakness into year end. USDZAR former high of 10.50 is still some distance away so we don’t expect anything too crazy on the back of this break but if USD and EURZAR get dragged higher then this picture could get very gloomy very quickly. A break above 16.43 also signals a new Medium Term Trend towards a weaker ZAR on GBPZAR with all 3 trends then pointing towards further ZAR weakness:
|Short Term Trend: Up = ZAR Weakness|
|Medium Term Trend: Flat or Range-bound|
|Long Term Trend: Up = ZAR Weakness|