Rand Bolstered by Weaker Dollar

RAND TALKING POINTS & ANALYSIS

• MTBPS, manufacturing PMI and vehicle sales data paint a poor picture of the local economy.
• US jobs data in focus later today.
• USD/ZAR finds resistance at 18.50 and 200-day MA.

USD/ZAR FUNDAMENTAL BACKDROP

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The South African rand rallied yesterday and this morning against the US dollar after the Federal Reserve decided to keep interest rates on hold (expected). Markets viewed the pause in a dovish light despite Fed Chair Jerome Powell eluding to strong economic data – GDP, high inflation and a strong labor market.

ZAR strength followed amongst weaker South African and Chinese manufacturing PMI’s showing the influence of the US economy on the local currency. Furthermore, total vehicle sales in South Africa fell reaching two month lows.

Yesterday, the Medium-Term Budget Policy Statement (MTBPS) highlighted some of the country’s headwinds including weak economic growth, increasing debt levels and ongoing blackouts (loadshedding). The impact on the rand was minimal but will keep traders wary of the vulnerable economic backdrop within South Africa.

Today’s economic calendar (see below) is fairly light and will be focused on additional US jobs data. Volatility should pick up from tomorrow’s slew of US centric high impact data including the Non-Farm Payroll (NFP) report and ISM services data – US is primarily services driven.

USD/ZAR ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX Economic Calendar

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TECHNICAL ANALYSIS

USD/ZAR DAILY CHART

Chart prepared by Warren Venketas, TradingView

As mentioned in my prior analysis, a break below the zone in and around the 18.7759 level would open up the 200-day moving average (blue) and 18.5000 psychological handle respectively. This key area of support could slowdown ZAR bulls as the Relative Strength Index (RSI) approaches oversold territory.

Resistance levels:

• 19.0000
• 50-day MA
• 18.7759
• 18.5000/200-day MA

Support levels:

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