USD/ZAR: Rand is about to do something it hasn’t done in 9 months

By:
on Jan 28, 2021
Updated: Jun 1, 2022
Listen
  • The USD/ZAR price is about to have its first monthly gain since April 2020.
  • The performance is mostly because of the stronger US dollar.
  • The weak South African rand has also contributed.

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

The USD/ZAR is on course for its first monthly gain since April last year as the situation in South Africa gets worse. The pair is trading at 15.2348, which is more than 5% above where it started the year at.

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins.

USD/ZAR
USD/ZAR price action

US dollar strength

Copy link to section

The USD/ZAR has risen in January partly because of the stronger US dollar. The dollar index is trading at $90.68, which is 1.7% above the monthly low of $89.72. 

The greenback has risen mostly because of the risk-off approach in the market as the number of coronavirus cases continued rising. Also, the vaccine roll-out in most countries was not as fast as what experts were expecting. 

As a result, many countries in Europe like the United Kingdom, Germany, China, and France launched large-scale lockdowns. 

Similarly, in South Africa, a severe strain of the virus continued to spread forcing the government to implement more lockdown measures. In total, the country has confirmed more than 1.43 million Covid cases and more than 42,500 deaths.

Meanwhile, the USD/ZAR rose because of the weak economic data from South Africa. Recently, data showed that the manufacturing, mining, service, and retail sectors were under intense pressure. 

Inflation is at a 16-year low. And today, data showed that the producer price index dropped from 0.4% in November to 0.2% in December. On an annualised basis, the PPI remained intact at 3.0%.

The South African rand is also falling because of the country’s fiscal situation. The government has continued to spend and borrow even as tax collections drop. Still, the SARB has signaled that it will increase interest rates later this year.

USD/ZAR technical outlook

Copy link to section
USD/ZAR
USD/ZAR technical chart

On December 20, the USD/ZAR dropped to a multi-month low of 14.50 on December 20. It then rose and reached its year-to-date high of 15.66 on January, 11. On the daily chart, the pair has struggled to move above the YTD high and the important support at 14.77. It is also inside the Ichimoku Cloud and slightly below the descending blue trendline. It is also on the same level as the 50-day exponential moving average. 

Therefore, the outlook for the USD/ZAR is relatively neutral. If it breaks above the highest point this year, bulls will be motivated to keep pushing it higher, possibly to 16.00. On the other hand, if it moves below the support at 14.77, it will attract more bears. Therefore, consider using the risk management tools provided by your CFD trading broker.

Ad

Want easy-to-follow crypto, forex & stock trading signals? Make trading simple by copying our team of pro-traders. Consistent results. Sign-up today at Invezz Signals™.

0/10
Learn more
Forex