ZAR Buoyed by Declining US Sentiment, Job Openings

USD/ZAR News and Analysis

• US consumer confidence takes a hit as labour market shows slight signs of easing
• ZAR technical outlook eyes 200-simple moving average (SMA)
• ZAR looking ahead to Chinese manufacturing PMI as the sector contracts
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

US consumer confidence Takes a Hit, Job Openings Decline – USD/ZAR Lower

A US consumer confidence report missed expectations and US job openings (JOLT) posted the largest decline in job openings since the pandemic began – offering the slightest indication that the job market may be showing signs of easing. The resulting USD drop and lift in gold has seen USD/ZAR continue to selloff. Keep an eye on US non-farms on Friday as job additions in August are expected to continue the steady downward trend.

ZAR Technical Outlook Highlights 200-Simple Moving Average

USD/ZAR has continued the selloff that has ensued since tagging the April 2020 high at 19.3533, now heading towards the 200 simple moving average and 18.0440. With few ZAR drivers, particularly now that the SARB appears to be on hold, USD/ZAR price action is likely to be determined by Chinese and US data flow. A further deterioration in Chinese fundamentals could pose a challenge for the ZAR, while US PCE data and the second estimate of Q2 GDP are likely to impact the pair.

USD/ZAR Daily Chart

Source: TradingView, prepared by Richard Snow

The longer-term chart doesn’t bode well for ZAR bulls as the long-term ascending channel naturally limits USD/ZAR downside, currently testing the 23.6% Fibonacci retracement of the 2021 – 2023 major advance in the pair.

USD/ZAR Weekly Chart

Source: TradingView, prepared by Richard Snow

The South African Reserve Bank (SARB) hiked local interest rates 10 consecutive times before the July meeting, where it decided to hold rates steady. Progress not just on headline CPI but also the stickier, core CPI allows the Bank more flexibility in future meetings.

With the Bank effectively on hold (or pause), interest rate expectations for the ZAR have decreased and are no longer seen as a driver of the emerging market currency.

South African Inflation Evolution

Source: TradingView, prepared by Richard Snow

Chinese Manufacturing Data Due This Week

China accounts for around 15% of total SA exports and therefore, developments in the Asian nation have an indirect impact on the rand. Next week Chinese manufacturing PMI (NBS) data is due. The manufacturing sector is in a contraction and estimates of 49.4 keeps the sector in decline despite the marginal improvement from last month’s print.

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— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX