The last minutes of Friday's trading were not favorable to South African Rand, who became the hostage of messages coming from two of the largest rating agencies. At the end of the week, Standard & Poor's analysts decided to cut the South African debt rating to rubbish, which should be linked primarily to public finances. An additional blow was imposed by Moody's rating agency shifting South Africa to a basket of states that could count on a possible downgrade.
S&P lowered the country's local-currency rating one step to BB+, one level below investment grade, and placed it on a stable outlook. Its assessment of South Africa's foreign-currency debt, which is already considered speculative, was taken down one notch to BB. Moody's opted to keep both readings on Baa3, its lowest investment grade but put them on review for possible downgrade. Moody's added that the review would leave room for it to assess the government's willingness and ability to respond to these rising pressures through growth-supportive fiscal adjustments that raise revenues and contain expenditures.
Let's take a look at the USD/ZAR technical picture at the H4 time frame. At present, Rand is falling by more than 2.0% and it is the weakest component of the Emerging Markets basket. The price has broken below the technical support at the level of 13.7960 and currently is trading below the golden trend line support. The closest key support for USD/ZAR remains at 13.2453.
