Economists at Credit Suisse raise their USD/ZAR target to 16.50 (from a target range of 14.70-15.30). Short-term constructive views on the USD and lack of obvious rand-positive domestic catalysts suggest that the risk to USD/ZAR remains skewed on the upside, in their view.
“We now raise our USDZAR target to 16.50 as we drop the range view (of 14.70-15.30) which we have held for many weeks.”
“We see a case for changes in rate differentials to continue to favour the USD relative to other major G10 currencies such as the EUR and the JPY. A downward trend in EUR/USD has historically been associated with a rally in the USD against most EM high-yielders, including ZAR.”
“Local developments in South Africa are unlikely to prevent further USD/ZAR gains in case the USD pushes higher. FX markets have until now largely ignored the most notable local events recently.”
“Last week’s break in USD/ZAR to levels above the previous year-to-date high (from January) leaves markets with no obvious resistance level (on the upside) other than the high in late October 2020 of close to 16.50. Meanwhile, USD/ZAR currently sits well-above important technical levels such as its 200-day moving average.”
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