This week, the rand made some missed gains for the US dollar despite the dollar’s strength, as global investors’ search for yield outpaced the herd towards the dollar. This is not unique to the rand, as this trend has crossed the peak emerging market (EM). In addition, hopes for a U. S. stimulus have risen. The U. S. government once supported the rise in emerging markets, which has been the main influence on the USD/ZAR pair in recent times. It plagued emerging markets and will continue to do so until some certainty is established.
The year 2021 net negative for the rand against the dollar (see chart below), which lately stands at 2. 1%. The rand is more or less in the middle of the table relative to other emerging markets, however, a global recovery expected the rand towards the highs of December 2020.
FX Performance 2021 the US dollar
Chart ready via Warren Venketas, Refinitiv
South Africa has allegedly pushed back the peak of the current COVID-19 wave, as daily new cases (see chart below) have declined. It will be attractive to see how this statistic evolves after President Cyril Ramaphosa eased restrictions earlier this week. The rand continued to gain after the announcement, in line with global optimism.
COVID-19 news in South Africa (daily)
Chart ready via Warren Venketas, Refinitiv
USD/ZAR DAILY CHART
Chart ready via Warren Venketas, IG
In my research this week, I evaded the probability of a breakout below the point of the symmetrical triangle continuing in the direction of the past (downtrend) trend. It has now been shown that the value action hovers around the mental point of 15. 0000. This point (previously horizontal) now serves as resistance to USD/ZAR bulls.
From a technical and basic perspective, the Rand may also continue towards the January low at 15. 7632 for the next week or two, however, knowledge of today’s NFPs could lead to short-term volatility depending on the actual numbers released while USD/ZAR would possibly occur a rise if exceeded and confirmed at 15. 0000.
The relative strength index (RSI) has now fallen below the 50 level, suggesting a bearish bias and supporting the existing downtrend.
USD/ZAR: KEY TECHNICAL POINTS TO CONSIDER
NFP figures are forecast at 50,000 tasks created by January 2021, representing a significant backlog compared to previous knowledge (-140,000). This positive knowledge implies an expected recovery in the US. It has shown remarkable strength this week, which likely reflects the estimated figure. Any disappointing release (below expectations) can lead to a sharp drop in USD/ZAR, while a 50K reading probably wouldn’t provide much in terms of value fluctuation.
Source: DailyFX Economic Calendar
— Written through Warren Wenketas for DailyFX. com
Contact and Warren on Twitter: @WVenketas
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