USD/ZAR: Shooting star points to a brief rand reprieve

on Jun 7, 2023
  • The South African rand has jumped in the past few days.
  • The USD/ZAR has formed a shooting star on the weekly chart.
  • The pair has more downside in the coming days.

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The USD/ZAR exchange rate is loitering near its all-time high as concerns about the South African economy continued. The USD to South African rand pair peaked at a record high of 20, meaning that it has jumped by more than 44% from the lowest level in May 2021.

South Africa power blackouts

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Emerging market currencies have plunged to a record low. One of the biggest forex news on Wednesday was that the Turkish lira has plunged to a record low of 23 against the US dollar. Similarly, the Argentinian peso, Nigerian naira, and Pakistani rupee have plunged to a record low. 

The main reason why the South African rand has plunged is the ongoing load shedding mechanism in the country. In May, Eskom, the power monopoly announced that this load-shedding process will continue in the coming months.

I recently talked to people in South Africa and the view is that the situation is worse than is being reported. Most of them are going through black outs on a daily basis. 

The impact of all this is that South Africa’s businesses are now being forced to invest huge sums of money on solar power and power generators. This means that companies are having to spend more money on energy.

At the same time, many small South African companies are finding it difficult to operate with power outages for most parts of the country. As a result, the country’s economy is not doing well and the situation could get worse.

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Data published on Tuesday showed that South Africa’s economy expanded by 0.4% in the first quarter. This was an improvement after the economy contracted by 1.1% in the fourth quarter. It has now moved to pre-pandemic levels.

USD/ZAR technical analysis

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USD/ZAR chart by TradingView

The weekly chart shows that USD to ZAR exchange rate is hovering at its all-time high of 20. It has now pulled back and moved slightly below the key support level at 19.34, the highest point in April 2020. 

The USD/ZAR pair remains above the 25-week and 50-week high, signaling that buyers are still in control. Further, the pair is slightly below the upper side of the ascending channel shown in orange. The forex pair has formed a shooting star pattern, which is usually a bearish sign. Therefore, the pair will likely drop in the near term as sellers target the next psychological level at 19.00. A move below that level will see it drop to the 25-week moving average of 18.41. More upside of the pair will see it jump at 21.


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