Rand Dollar Outlook:
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Rand Holds Steady Despite Renewed Restrictions
Despite reaching an all-time high in April 2020, USD/ZAR has steadily declined as bulls failed to maintain favor. Although the economic implications of Covid-19 have caused panic globally, the emerging market currency has appreciated against its US Dollar counterpart, largely attributed to an increase in risk-on sentiment as investors anticipate a roll out of the much anticipated Coronavirus vaccine.
Although South Africa has only experienced its first wave of the pandemic, president Cyril Ramaphosa has announced the reimplementation of certain restrictions, aimed at potentially reducing the number of new Covid-19 related cases and reducing the likelihood of a second wave. However, this was overshadowed by the increased possibility of additional fiscal stimulus in the US, as NFP figures came in at 245k, almost half of expectations of 460k.
USD/ZAR Technical Analysis
From a technical standpoint, the descending trendline, encapsulates the downward trend which has persisted for the past seven months, providing resistance for the pair. As the bears continued to exert dominance, the 76.4% Fibonacci retracement level has provided support at 15.2, holding the bears at bay. In addition to this, the Moving Average Convergence/Divergence (MACD) is currently hovering below the zero line, a potential signal that the pair may still be oversold.
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USD/ZAR Daily Chart
Chart prepared by Tammy Da Costa, IG
USD/ZAR Strategy Ahead
For now, current support continues to hold at 15.2, the 76.4% Fibonacci retracement level, with a break below this level resulting in a new support level of 15.00, a key psychological level.
In the upside, the next potential resistance levels may hold at 15.5, with a break above bringing 16.00 back into focus.
— Written by Tammy Da Costa, Market Writer for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707