Summary:
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South African Rand falls to 3-week low
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Rumours of finance minister requesting to be sacked
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USDZAR at interesting level; S-H-S or retest of recent highs?
There’s been some big news in the emerging markets space today with both the Brazilian Real and Brazilian stocks (BRAComp) surging higher after Bolsonaro won the first round of the Brazilian elections by such a large margin that it looks likely he will prevail in the second round scheduled for October 28. Elsewhere, the South African Rand earlier came under pressure after reports of further political instability in the country.
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The USDZAR spiked sharply higher when these rumours hit the wires earlier, but the entire move has since been pared back. Source: xStation
Rumours doing the rounds that Finance Minister Nhlanhla Nene had requested to be relieved of his duties after he admitted to visiting the Gupta brothers saw the currency come back under threat, with the political situation causing investors concerns since President Ramaphosa replaced Zuma earlier this year. A spokeswoman for the President has said his office is not aware of Nene’s request but is coming under pressure to act after he failed to disclose meetings with the business family at the centre of the country’s biggest post-apartheid scandal.
The rand dropped over 1% when the news was broke but the market has since recovered most of these declines. The currency has been one of the worst hit this year in the EM crisis and after peaking at 15.69 last month, investors had begun to hope that the worst of its was behind them. The timing of this latest scandal couldn’t be much worse with a crucial statement on the medium-term budget scheduled to be released in just two weeks.
A longer term head and shoulders formation could be forming in the USDZAR with the head at the 2018 peak of 15.69. A second shoulder may be developing around here but it would require a break below the neckline at 14.00 for the setup to be triggered. Source: xStation
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