USD/ZAR spikes on fear of US sanctions

USD/ZAR spikes on fear of US sanctions

Traders are closely watching the USDZAR today after US President Donald Trump sent a out tweet which had many traders questioning whether it is a precurser to sanctions on the incumbant ANC government in South Africa.

Five hours ago Trump tweeted:

I have asked Secretary of State @ SecPompeo to closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers. “South African Government is now seizing land from white farmers.”

With the recent run on the Turkish Lira widely seen to be exacerbated, if not caused, by Trumps imposition of US sanctions, the conditions seem to be in place for a possible Lira 2.0 in the South African Rand (ZAR).

Traders are already speculating that a deep, extensive and well co-ordinated Land Reform effort in South Africa could have serious economic ramifications like those seen in neighbouring Zimbabwe in the 1980's. With the spectre of US sanctions being imposed simultaneously with serious Land Reform, there is a real risk confidence in the Rand starts to wane.

Early Stages

As it stands, Land Reform in South Africa has been limited and we may find that Trumps tweet is a warning shot across the bow the the ANC government in South Africa.

We may yet find that the prospect of US sanctions and a loss of confidence in the South African Rand forces cooler heads to prevail in what is, unquestionably, an extremely emotive political subject in South Africa.

USDZAR has broken a multi-year trend line and currently sits at key support at 14.172.

The 18.000 handle is the next major target to the upside