USD/ZAR: South African rand slides as the risk-off sentiment returns

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on May 13, 2021
  • The USD/ZAR price has risen after the strong US consumer inflation data.
  • Numbers showed that the South African mining sector is recovering at a faster pace.
  • The pair may keep rising as bulls target the upper side of the channel.

The USD/ZAR price is in a tight range after the relatively strong US inflation and South African mining numbers. It is trading at 14.1087, which is slightly above this year’s low of 13.95.

USD/ZAR
South African rand price action

US inflation and South African mining data

The South African economy seems to be doing better than what most analysts were expecting. Earlier this week, data by the country’s statistics agency revealed that the South African manufacturing sector continued to recover. 

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And today, data showed that the mining sector is on a recovery path. In total, mining production increased by 21.3% in March after falling by 2.3% in the previous month. This increase was better than the 3.9% that analysts were expecting. 

Gold production also rose by 10.5% after falling by 9.1% in February. This is a notable thing considering that the prices of key South African commodities have been rising. For example, gold has climbed to the highest level in more than 3 months while palladium has jumped to a record high. Platinum, too, has jumped to the highest point in several years. 

Further data from South Africa shows that the services industry is recovering while consumer inflation is rising. Therefore, these numbers mean that the USD/ZAR will have some justification if it raises interest rates in the final half of the year.

The USD/ZAR pair is also little changed because of a return of the risk-off sentiment. This happened after data by the United States showed that consumer prices rose at the fastest pace in 13 years in April. This increase was attributed to the recent stimulus and the strong commodity prices. As a result, there is a high possibility that the Fed will move faster than expected. Later today, the US will publish the latest producer price index (PPI) and initial jobless claims data.

USD/ZAR technical forecast

USD/ZAR
USD/ZAR technical chart

The four-hour chart shows that the USD/ZAR pair bounced back after dropping to the lowest level since January last year. By rising, the pair has moved above the lower side of the descending channel. It is also attempting to move above the 25-day and 50-day exponential moving averages (EMA). Therefore, the pair may keep rising as bulls target the upper side of the descending channel. If this happens, the next level to watch is 14.38, which is 1.65% above the current level.

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