The rand has been on a tear since the second week of April which as seen it pull the pair all the way down onto the psychological rate of 18.00, all the way from the previous all-time high of 19.92. The rand benefited from the global search for yield and at +10%, the 10-year SA government bonds still holds juicy carry trade returns for international investors. Additionally, the SARB has also toed the line with the Fed and has opted to stand by its hawkish bias. I don’t expect a move on rates from the SARB before the Fed cuts by another 25bps. Expectations are for the Fed to cut rates by 50bps in total for the remainder of the year so I expect the SA repo rate to remain above 7% for the rest of 2025, especially given last week’s news that there will be changes to the country’s inflation targeting regime. A new lower inflation target will imply that real rates will remain higher for longer which is rand supportive as it will attract more inflows to SA government bonds, on paper.
The recent surge in gold prices coupled with renewed risk-on sentiment following Trump’s tariff pause, has turned the USDZAR into a runaway freight train. The latest SA trade balance increased further to R24.8 million in March 2025 which is rand positive.
The three factors mentioned above, carry trade appeal, risk-on sentiment and the SA trade surplus, does strengthen the case for the rand bulls but has the rand ran a little too hot over the past few weeks? I believe it has and it will have to pull back to fetch some fresh liquidity before we see the pair break below the 18.00 mark.
The pair is currently attempting to break and hold below the 61.8% Fibo rate at 18.13 and the 200-day MA at 18.17. I expect the support to hold at these levels and for the pair to climb higher and fetch liquidity around 50-day MA level at 18.52 before we see a substantial break below 18.00.
It will be risky jumping in front of this freight train as the rand can pull the pair deeper towards 17.60 and 17.65 if the neckline from the downward channel does not hold. I’m keeping stops tight but rates below 18.00 do look like promising buy zones.
The recent surge in gold prices coupled with renewed risk-on sentiment following Trump’s tariff pause, has turned the USDZAR into a runaway freight train. The latest SA trade balance increased further to R24.8 million in March 2025 which is rand positive.
The three factors mentioned above, carry trade appeal, risk-on sentiment and the SA trade surplus, does strengthen the case for the rand bulls but has the rand ran a little too hot over the past few weeks? I believe it has and it will have to pull back to fetch some fresh liquidity before we see the pair break below the 18.00 mark.
The pair is currently attempting to break and hold below the 61.8% Fibo rate at 18.13 and the 200-day MA at 18.17. I expect the support to hold at these levels and for the pair to climb higher and fetch liquidity around 50-day MA level at 18.52 before we see a substantial break below 18.00.
It will be risky jumping in front of this freight train as the rand can pull the pair deeper towards 17.60 and 17.65 if the neckline from the downward channel does not hold. I’m keeping stops tight but rates below 18.00 do look like promising buy zones.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.