USD/ZAR: South African rand rebounds but gains could be limited
- The South African rand rebounded by more than 1% after the government announced new Covid vaccines.
- The government also extended its restrictions.
- The currency has been in a downward trend in the past few days.
The USD/ZAR pair is down by about 1% after the South African government secured about 20 million doses of the coronavirus vaccine. It is trading at 15.3970, which is 6% above this year’s low of 14.5132.
South Africa coronavirus crisis
South Africa is facing a coronavirus crisis as the number of cases continues to rise. The country has so far confirmed more than 1.5 million cases and more than 33,000 deaths. Yesterday, the number of cases and deaths increased by 15,000 and 415, respectively.
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The recent surge is being driven by a new strain of the virus that appears to be spreading faster than the initial one.
As a result, the government has announced new measures set to slow this spread. It closed the land borders and banned indoor and outdoor gatherings and sports events. It has also announced a 9 pm to 5 am curfew. All these measures will affect the recent economic recovery and have an impact on the South African rand.
In a statement today, the South African government said that it had secured 20 million doses of coronavirus vaccine. These doses will arrive in the first half of the year, meaning that the country has a long way to go. Just last week, the government reached a deal of 1.5 million doses of the vaccine manufactured by AstraZeneca.
The USD/ZAR is also rising, in part, due to the relatively muted US dollar. The dollar index is trading at $90.38, which is unchanged from where it ended the day yesterday. It has risen by more than 1.15% in the past five days.
This price action is partly because there are no major data from the United States today. Instead, forex investors will react to statements by Fed officials including Raphael Bostic, Robert Kaplan, and Brainard Mester.
USD/ZAR technical analysis
The USD/ZAR pair formed a double bottom pattern at 14.5330. Since then, it has jumped by about 6% and moved above the 25-day and 50-day exponential moving averages. The pair has also moved above the 78.6% Fibonacci retracement level and is slightly below the 61.8% Fib level. Also, the Relative Strength Index has been rising.
Therefore, the pair will likely continue rallying as bulls aim for the next resistance level at 16.00, which is the 61.8% retracement level. However, a drop below 15.10 will invalidate this trend.