USD/ZAR: Rand darts higher after better South Africa GDP data

The USD/ZAR price declined sharply on Tuesday, helped by the relatively better South African GDP data and the US Treasury yields data. The pair declined from the weekly high of 15.5683 to 15.300.

South Africa GDP data

The South Africa Statistics Bureau published relatively strong economic data than expected. In its report, the bureau said that the country’s economy expanded by 1.5% in the fourth quarter leading to an annual gain of 6.3%. This increase was better than the median estimate of 5.0%.

According to the bureau, most sectors in the economy recorded an improvement in the fourth quarter. The most improved was the manufacturing sector, which was helped by food, beverages, and motor vehicles sub-sectors. The only laggards were the mining and finance industries.

In total, the South African economy declined by 7.0% in 2020, helped by the improvements in the third and fourth quarters. This was the worst economic performance since 1946.

Still, there are signs that the South African economy is recovering. The recent manufacturing and services PMI numbers were relatively positive. Further, the country’s inflation is rising, helped by higher crude oil prices. In addition, the important mining sector is seeing more activity as commodity prices rise.

The USD/ZAR price has also dropped because of the performance of the US Treasuries market. After surging yesterday, the yields have cooled-off today as investors eye the latest US inflation data. 

Economists expect the data will show that consumer prices in the US jumped from the previous 1.4% to 1.7%. This increase will be mostly because of the $900 billion stimulus package passed in January and higher oil prices.

USD/ZAR technical analysis

The USD/ZAR price dropped from yesterday’s high of 15.5712 to 15.300. On the two-hour chart, the price has moved to the lower line of the Bollinger Bands. It is also slightly above the ascending trendline that connects the lowest levels since February 25. Further, the price is slightly above the important support level at 15.20, which was the highest level on February 26. 

Therefore, while the pair may continue to drop, there is a possibility that it will resume the upward trend as more buyers come in. This thesis will be invalidated if the price moves below the ascending trendline and the support at 15.20.