BRICS & Jackson Hole Oppose Rand Upside

RAND TALKING POINTS & ANALYSIS

• Falling SA inflation hinders ZAR upside.
• SA stock and bond outflows a concern.
• USD/ZAR exhibiting hesitancy ahead of key economic data.

USD/ZAR FUNDAMENTAL BACKDROP

The rand is steadily consolidating after last week’s Jackson Hole Economic Symposium where markets are mulling over the ‘higher for longer’ viewpoint from the Federal Reserve. Today’s price movements on USD/ZAR has the greenback slightly firmer against the ZAR despite the fact that the Dollar Index (DXY) is marginally lower on the day. Last weeks local inflation miss has also contributed to a more accommodative expectation from the SARB, leaving the rand exposed to more downside.

Looking at the JP Morgan Emerging Market (EM) Currency Index below, EM’s are generally tracking lower today largely due to concerns around China where the government decreased stamp duty on local shares. Economic growth has been a key theme of recent for China and recent economic data has supported a bleak outlook. Generally, this does not translate well for the rand and further concern and/or deterioration could weigh negatively on the currency.

JP MORGAN EMERGING MARKETS CURRENCY INDEX

Source: Refinitiv

Another interesting fact released this morning shows that South African stocks last week saw an outflow of R2.87 billion ($153.2 million) by foreign investors with a similar pattern being seen through local bond sales. The BRICS summit may have been a potential catalyst as many western nations are not in favor of many of the undertakings by the BRICS bloc, resulting in investor resistance against these nations.

The rest of the week (see economic calendar below) holds several South African data releases but the focal point for USD/ZAR will be solely focused on US Core PCE and Non-Farm Payroll (NFP) and Chinese manufacturing PMI prints respectively. Rand bulls will be looking for softer inflation, weaker labor data and firmer China manufacturing numbers.

SOUTH AFRICA ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

USD/ZAR DAILY CHART

Chart prepared by Warren Venketas, IG

Daily USD/ZAR price action trades without any real direction bias at this point confirmed by the Relative Strength Index (RSI) lingering around the midpoint region. Upcoming fundamental news will likely provide traders with more clarity in the short-term.

Resistance levels:

Support levels:

• 18.5000/50-day MA (yellow)
• 18.2500

Contact and followWarrenon Twitter:@WVenketas