USD/ZAR: Developments in Turkey creates upside risks – MUFG

Analysts at MUFG Bank, consider the USD/ZAR could rise in the short-term linked to the recent depreciation of the Turkish lira. They have the idea of a long position in USD/ZAR at 17.500 targeting 18.400 and a stop loss at 17.100. 

Key Quotes:

“ZAR performance has become more tightly linked to negative developments in Turkey. USD/ZAR is currently testing resistance from the end of May highs at 17.665 which if broken would open the door to further near-term gains.”

“The main risk to the trade idea is that the ZAR has already moved along way over the past week as it has fallen by around 5% against the USD. It increases the risk of a short-term squeeze of long positions. One potential risk would be if the CBoT acted decisively and raised rates significantly to offer more support for the TRY.”