USD/ZAR: Stop loss lowered to 17.45 as SARB cut – TDS

SARB cuts by 50bps but more easing is to come as we will see further deterioration of economic activity that should suggest a correction of the ZAR vs USD. Therefore, analysts at TD Securities adjust the stop loss on the long USD/ZAR position opened earlier today.

Key quotes

“SARB has cut 50bps today, in line with our forecast and the consensus expectations, and in spite of growing expectations for a larger cut today.”

“The highlights for the day are a downside revision for real GDP growth to -7% in 2020 from -6.1% previously, and average CPI for the year to 3.4% from 3.6%.” 

“We believe that the current and future environment, combined with the SARB's rhetoric and gradual adjustment, leaves the door open for another cut, that we currently estimate in a final 50bps of easing in the July meeting.”

“As USD/ZAR keeps falling (at +1.6% vs USD, the rand is the best-performing currency today), it is fast approaching the RSI oversold threshold - a level that has often proved very short-lived in the past and good mean-reverting indicator. We, therefore, lower the stop to 17.45.”