Rand trading firmer as 2019 election votes are tallied

As the Independent Electoral Commission (IEC) tallies votes from South Africa’s sixth general election, our local currency has started to strengthen, outperforming its emerging market currency peers, despite negative global market catalysts to contend with.

Below we see BRICS (Brazil, Russia, India, China and South Africa) currency movements against the dollar on the day after South African’s cast their votes. While the Brazilian Lira (BRL), Russian Ruble, Indian Rupee and Chinese Yuan have all weakened on the day, the South African rand has managed to strengthen on the day.

While rand strength may appear only marginal, it occurs on a day where we have seen risk off sentiment in the general market place, with US China trade uncertainty being a major international catalyst.

In a previous note, How to trade the rand during the general election, it was suggested that the ANC margin of victory may be a catalyst for rand strength, should the ruling party achieving more than 55% of the registered vote. A higher margin of victory was said to promote more policy certainty and perhaps a stronger mandate for President Cyril Ramaphosa, who has proven to inspire business confidence in the past. At the time of writing (evening of 9 May 2019), the ANC was leading the election with 56.6% of the vote, with 65% of votes having been tallied.

USD/ZAR Technical View

The white arrow on our chart marks a bearish reversal for the USD/ZAR currency pair (dollar weakness / rand strength). The bearish reversal signal has occurred off range resistance at R14.60/$ and is supported by the stochastic indicator crossing out of overbought territory. R13.90/$ is considered range support and is our initial downside target should the short-term decline continue. Should the USD/ZAR move to close below R13.90/$ then R13.55/$ becomes our next support target. Traders who are short the USD/ZAR currency pair may consider using a close above the R14.60/$ level as a stop loss consideration.

GBP/ZAR Technical View

The rand has also managed to start renewing some strength against the British pound, with a bearish reversal for the GBP/ZAR pair having formed at around R19.10/GBP, just before resistance at R19.30/GBP. This reversal signal is also supported by the stochastic crossing out of overbought territory. R18.35/$ becomes the initial support target from the move, a break of which (confirmed with a close) could see R17.35/GBP the next downside target. Should the GBP/ZAR instead move to close above the R19.10/GBP mark, the bearish indications would be deemed to have failed.

EUR/ZAR Technical View

Similar to the movements we are seeing against the USD and GBP, the ZAR has also started to renew some strength against the euro, with a bearish reversal for the EUR/ZAR pair having formed at around R16.30/EUR, just before resistance at R16.50/EUR. The price reversal signal is accompanied by the stochastic crossing out of overbought territory. R15.65/EUR becomes the initial support target from the move, a break of which (confirmed with a close) could see R15.20/EUR the next downside target. Should the EUR/ZAR instead move to close above the R16.50/EUR mark, the bearish indications would be deemed to have failed.