South African Rand Event Risk Today!

A shock no-confidence motion asking President Jacob to step down has been posted this weekend at the ruling ANC’s National Executive Committee meeting.

The motion was tabled by the 3 Senior Ministers (a shock in itself) including the Chief Whip. Voting has been postponed until today and should happen sometime in the next few hours.  President Zuma’s situation has been described as tenuous after a series of scandals over the last few years.The fact that the Presidents own ANC Party appears to be closing ranks against him is significant having put up a previously united front.

The South African Rand (ZAR) has rallied this morning against the USD as the markets clearly see a Zuma departure as a positive sign for an economy creaking at the seams and facing the threat of a downgrade of its debt to “junk’ status.

USD/ZAR has fallen from a 14.1164  close on Friday to a low around 13.8000 this morning in Asia. Of course, the market is anticipating a victory for the anti-Zuma faction, and this is not a given. Should Mr Zuma win, we may see a lot of today’s USD/ZAR sell-off unwound. Conversely, if Mr Zuma loses, we may see a continuation of today’s move.

ZAR has been battered, like all emerging markets, by the ebbs and flows of the USD rally and the hike in USD yields. Recently it has consolidated in a 14.0000/ 14.30000 range until this morning.

14.0000 is shown short-term resistance as per the hourly chart below with today’s low at 13.8000 support.

USDZARhourly

In the bigger picture, longer-term support lies at 13.1800 a multi-day low. Resistance lies at 13.9700/14.0000 the 100-day moving average and the aforementioned multi-hour lows.

USDZARDaily

SUMMARY

Traders should keep a close eye on newswires today as to whether Mr Zuma wins or loses, there is almost certainly going to be more volatility in USD/ZAR because of it. Possibly a lot of it! As ever, when trading gets “noisy,” it is always good to have the bigger picture levels of importance in your mind.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.
Jeffrey Halley

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