We are recommending a new short USD/ZAR trade idea. The ZAR has underperformed recently after USD/ZAR failed to break below support from the 200- day moving average in the middle of this month.
Our short- term valuation model which incorporates the impact of US yields and South Africa’s terms of trade is signalling that the ZAR is not fully reflecting the recent improvement in short-term fundamental drivers.
The main downside risks in the week ahead would be if the Fed and other major central banks provide a hawkish policy shock that disrupts financial markets and lifts US yields and the USD. However with the Fed slowing the pace of hikes and US inflation falling back, we expect market participants to continue looking through the Fed’s hawkish rhetoric.
- MUFG Strategy
Comentários