ZAR Talking Points:
- South African Rand still holds steady after dreary GDP figures.
- ZAR crosses: Moving Averages (MA) may suggest impending Rand strength.
- Multiple interest rate decisions next week affecting ZAR crosses.
South African Rand (ZAR) Remains Resilient
After poor GDP figures announced by Statistics South Africa (StatsSA), the Rand has made up much of the subsequent losses on USD, GBP and EUR pairs. Although the striking GDP figures were perceived to be somewhat excessive, on a relative basis to global Q2 GDP figures South Africa was largely in line. What could have sparked the initial sell-off may have been the slightly worse than initially forecasted figures.
Emerging Market (EM) currencies remain resolute as global investors seem to favor the ‘risk-on’ market sentiment. This comes after easing lockdown measures globally and an increase in service and manufacturing industries. As always, future economic events and decisions can swiftly change this global sentiment so keeping up to date with forthcoming news is essential in this current economic climate.
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ZAR Technical Analysis
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USD/ZAR: Daily Chart
Chart prepared by Warren Venketas, IG
Over the past few weeks the Rand has proven to be resilient against the US Dollar with prices fluctuating between the 16.5000 and 17.0000 psychological levels. With a possible bearish cross looming (100-day MA crossing below the 200-day MA), the bottom end of the recent range (16.5000) may be targeted as initial support. Price has recently fallen below the 200-day MA suggesting a change in the long-term trend from bullish to bearish.
Key points to consider:
- Potential bearish cross (100-day and 200-day Moving Averages)
- 16.5000 psychological level
GBP/ZAR: Daily Chart
Chart prepared by Warren Venketas, IG
The daily GBP/ZAR chart still trades within the multi-month triangle (blue) as it approaches trendline support. The 200-day MA (yellow) has been coarsely tracking this diagonal trendline support which as of this writing has been breached by price indicating a possible long-term trend reversal. As price breaks below this 200-MA and possibly trendline support, long-term sentiment could shift to a more bearish outlook similar to that of USD/ZAR. This outlook may be aided by marginally worse than expected UK GDP data this morning.
Key points to consider:
- Trendline support
- 200-day MA
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EUR/ZAR: Daily Chart
Chart prepared by Warren Venketas, IG
Keeping with the Moving Average (MA) technical theme, the EUR/ZAR pair has recently exhibited a shorter-term bearish crossover (blue) with the 20-day MA (green) crossing below the 50-day MA (black). This potentially relates to more near term downside which could see the 19.7428 50% Fibonacci level come into focus as initial support.
The 100-day MA (red) has proved to be a key level of support with the line being tested frequently this week. If price breaks through initial support (19.7428), the 100-day MA may be next.
Key points to consider:
- Short-term bearish crossover (20-day and 50-day Moving Averages)
- 19.7428 50% Fibonacci level
- 100-day MA
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ZAR Strategy Moving Forward
Rand strength is continuing with global factors providing the respective tailwinds. The effects of local statistics and data have been short lived of recent but this cannot be overlooked forever. Market conditions will eventually change and this could prove detrimental for the ZAR. For now, the ZAR is riding a global risk seeking wave which keeps pushing through domestic hurdles.
Upcoming interest rate decisions by both the US, UK and South African next week could spur more volatility and potential price fluctuations throughout ZAR crosses. Be aware of possible systemic effects from the Federal Reserve (Fed) as decisions taken by the FED may impact other central bank outlooks.
Stay abreast of key economic data releases with the DailyFX Economic Calendar
Wednesday September 16, 2020:
- Fed Interest Rate Decision 18:00GMT
Thursday September 17, 2020:
- BoE Interest Rate Decision (11:00 GMT)
- SARB Interest Rate Decision (13:00GMT)
— Written by Warren Venketas for DailyFX.com
Contact and follow Warren on Twitter: @WVenketas
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