FxWirePro: Short term bearish speculation likely on USD/ZAR, caution for long term shorts

Technical briefing:

On daily charts, the pair is taking trendline support at around 13.4363 levels, we can very well figure out that it has travelled equidistant levels of upper channel space. RSI oscillator is showing downward convergence with the price slumps, while persistent %D crossover signifies the short term bearish sentiments. But monthly charts still suggests ongoing long term uptrend to prevail as there is no selling heaviness is indicated by any of the technical indicators even though both RSI and stochastic curves have crossed overbought regions.

The investors received the first piece of ZAR positive news yesterday after a long time. Current account data for Q2 printed at -3.1% of GDP, which is a large improvement on the Q1 data (-4.7%). Fears of a sudden stop in current account financing will decline as a result. Consequently, selling longer dated risk reversals at what are multi-year highs is not a terrible idea in this regard, but doing so ahead of the Fed meeting is not for the half hearted.

Nonetheless, it is clear that the aggressive ZAR depreciation year to date is having an impact through lower imports and slightly higher exports being recorded. This is not to say that everything will be plain sailing from now on. Real interest rates remain barely positive and economic growth remains subdued, meaning that ZAR will hardly go on an appreciation trend anytime soon. Indeed, if oil prices rebound this will put pressure on the deficit once again.