USD/ZAR: South African rand relentless rally accelerates
- The USD/ZAR dropped to the lowest level since February 2019.
- The decline gained momentum after the strong South Africa PMI data.
- The pair will next react to the latest US employment data.
The USD/ZAR declined to the lowest level since February 2019 as the relentless South African rand rally accelerated. It is trading at 13.54, which is 30% below the highest level in 2020.
South African rand spectacular rally
The South African rand has had a spectacular rally in the past few months. Since April last year, the currency has gained against the US dollar in all but one month. Also, the rand has gained by about 30% against the US dollar, making it the best streak on record.
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The USD/ZAR continued to decline today after the relatively positive South Africa’s PMI data. According to Standard Bank, the country’s PMI dropped from 53.7 in April to 53.2 in May this year. With the PMI remaining above 50, it means that the country’s businesses continue doing well in May.
Recent data from South Africa have been relatively positive. For example, mining production has bounced back, helped by the fact that metal prices have surged. Gold is approaching its all-time high while other metals like platinum and palladium have also risen.
Further data from South Africa showed that retail sales have started to rise while inflation is relatively steady. However, recent data showed that the country is still facing substantial levels of unemployment.
Later this week, the USD/ZAR will react to economic data from the United States. ADP will publish the latest non-farm private payrolls numbers on Thursday. The numbers will be followed by the latest initial jobless claims numbers. Analysts expect these numbers to show that the number of Americans filing for jobless claims declined below 400k for the first time since the pandemic started.
Markit and the Institute of Supply Management (ISM) will also publish the latest services and non-manufacturing PMI numbers. And on Friday, the US will release the latest non-farm payroll numbers.
USD/ZAR technical analysis
The weekly chart shows that the USD/ZAR pair has dropped in the past three consecutive weeks. The pair has also moved below the 61.8% Fibonacci retracement level. It is also slightly above the 78.6% retracement level at 13.12, which is about 3% below the current level. The pair is also below all moving averages. Therefore, at this stage, the path of least resistance for the pair is lower, with the next target being at 13.1247.
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