RAND Analysis and Talking Points
- Eyes Rand Highs in April 2020!
- ZAR has been swamped by headwinds both domestically and globally.
- A sharp rally on the USD/ZAR fading away?
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USD/ZAR basic background
The South African rand was at the mercy of several domestic and external factors that caused the emerging market (EM) currency to decline. 4.75% This week only! Let’s break down some of the challenges facing the rand and what its repercussions could be in the future:
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Starting from the protracted crisis by rolling blackouts, economic growth has suffered as a result of the disruption of day-to-day business practices leaving many small and medium businesses in distress. As a result, foreign investment and confidence suffered from less money flowing into South Africa (less demand for ZAR). Political instability and corruption go hand in hand with the electricity crisis, lack of conviction and poor perception from an outsider’s perspective.
Commodity complex
South African merchandise exports are now under pressure with today’s losses in the Chinese CPI and PMI indicating lower demand (domestic and global) for their products and services. Being South Africa’s main importer of commodities, pessimism about China’s reopening is generally associated with a weaker rand. Logistical disruptions in the local shipping system has also been a headache for many exporters and local businesses causing huge losses in trade.
Foundational knowledge of the trade
Commodity trading
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US factors
The United States has been the dominant power in the global markets lately. Now that it’s a file The Fed seems to be keeping interest rates steady in the short term, and another, more serious threat to the global financial system has emerged in the form of the US debt ceiling. The United States is unable to pay its debts and will require an increase in its ability to borrow (the debt ceiling) to meet these obligations. Until such time as there is more clarity about the crisis between Republicans and Democrats, the US dollar will remain supported due to its safe-haven appeal and risk aversion in global markets. The ongoing banking crisis in the US is also having a systemic negative impact on the rand and is contributing to the souring of the broader risk sentiment – boosted by investors’ flocking to US government bonds.
Today’s economic calendar (see below) should generally increase the rand with mining and manufacturing data for March showing significant improvement while US PPI and unemployment data pointing to a slowdown in the US economy. The Fed is due to speak later in the trading day and could provide some short-term volatility to the pair; However, South African President Cyril Ramaphosa appears to be adding fuel to the ZAR fire in the National Assembly.
In short, if the variables affecting the pair continue as they are, the rand will find it difficult to regain any momentum against the dollar.
Economic calendar for the USD/SAR
source: DailyFX Economic Calendar
Technical Analysis
USD/ZAR daily chart
Chart created by Warren VenkitasI.G
Introduction to technical analysis
Candlestick patterns
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The daily price movement of the USD/ZAR pair shows an extension of the recent symmetrical (black) triangle breakout, and the continuation of the previous upward trend. However, the pair has now entered the overbought area on the Relative Strength Index (RSI) and may reach its top in the short term. Although there is still room for a push to all-time highs, that could be capped around 19.5000 Mark and I expected back about 19.0000 Dealing with psychological support in a timely manner.
resistance levels:
Support levels:
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