BRICS currencies movement for the week – 6 March 2020

Another tough week for all Emerging Market Currencies, filled with huge (Coronavirus) uncertainty that not even a Fed rate cut (-0.5%) could comfort. The big positive was that the South African Rand remained quite resilient compared to other BRIC currencies.

#BRICS currency/USD movements for this week:

Brazil -3.3%
Russia -2.6%
India -2.0%
China +0.8%
South Africa 0.0%

Euro/USD +2.4%

Technically, the Rand ( ZAR ) broke below the very important resistance (at R15.50) for a brief moment after the Fed rate cut. This was however short-lived and find itself back at last week’s closing levels.

Still trading above all four the 8-, 21-, 50- and 200day moving averages ( EMA ), with all EMA’s still pointing upward. This is a clear indication that the trend is still very much against the “health” of the Rand.

Should weakness continue, the ZAR could very much test R15.85, levels last seen in 2016.

The ZAR still finds itself at EXTREME OVERSOLD levels according to its 14-day RSI .

I maintain my view that I would wait for the ZAR to break back below R15.50 before I consider any short-term long (short the USDZAR ) position on the ZAR .

Should the ZAR however break below R15.50, could see the ZAR find support firstly at the 8-day EMA (R15.45) and then the 21-day EMA’s (R15.21). R14.94 is quite a strong support-level with a break and close below these levels most probably placing us back at R14.50 – R14.65 levels. Should we break below R14.50, could see the ZAR seek support at R14.15.

I still maintain my longer-term (positive) stance on the Rand, with a medium-term target of R13.85. The probability of a repo rate announcement on 19 March 2020 is increasing by the day. In theory, should this happen, we could see some ZAR weakness after that. Up to that date, I do think a few more countries could follow countries like Australia, Canada an US, to lower rates as well, which could bring some interim strength in the ZAR. I would however caution any positions prior to a confirmation-break below R15 and will remain Neutral for now. Most likely trading band this week are being between R15 and R15.85.