Market Analysis Of ZAR: USD/ZAR Outlook

The Rand is one of the best-performing currencies in the Emerging Markets (EM) against the US dollar. The USDZAR currency pair was trading at a high of 15.25 at the beginning of the month. It has, however, experienced a solid bearish movement to close the week at 14.58. This is the weakest the USD/ZAR pair has been this month. 

Fundamental Analysis 

This ZAR strength comes amid a softer dollar, high commodity prices, and fears of a slowdown in the global economy. For instance, the Federal Reserve Bank has announced a tapering plan. Tapering contracts the economy, making the market bearish. This translates to a weak dollar. The Dollar is currently faced with a wind of uncertainty considering the high inflation rate with expected negative retails sales data for September. Similarly, only 194K jobs were added in September versus the expectation of 500K jobs. This sluggish labor market reinforced uneven economic recovery.

The South African economic outlook is improving despite the global challenges and riots that erupted in the country in July. According to the trading economics global macro models and analysts’ expectations, the Rand is projected to reach 15.2 at the end of the quarter. The Rand reached an all-time high of 19.35 in April. The 52 weeks range is 13.3473 and 16.5693. Since Monday, the Rand has increased 3%. This move is caused by the South African central bank’s expected move to raise the main lending rates at the November monetary policy meeting.

A weakening dollar, demand for local bonds, and an increase in the price of gold have played a significant part in strengthening ZAR. Most SA traders that trade with ZAR accounts and speculate on the USD/ZAR price movements claim that the domestic economic data, which portrays a picture of uneven economic recovery amid the COVID-19 pandemic, is yet to impact the Rand.

Technical Analysis 

The USDZAR has experienced quite a steady uptrend from June 2021 to August 20th. It then started plummeting, reaching a four-month low on September 10th. From September 13th September, the value of the Dollar against the ZAR increased up to 21st  September. However, the pair formed bearish triple tops marking the beginning of the current downtrend. 

The bearish trend has quite a strong momentum. It is worth noting that the pair closed the week at 14.5801. If the bearish trend continues, the pair will likely find support at 14.51799, a 61.8% Fibonacci level plotted from September low to October high. 

If USDZAR manages to break below this area, the pair could fall to 14.000. Besides being a psychological level, it has also acted as a support level in the past. If the pair plummets further, it could go all the way to a year low and find support at 13.40. The pair last traded at the 13.30 support area back in  February 2019. If the price bounces from the 61.8% Fibonacci level, it could rise past the recent high of 15.20 and find resistance at 15.50. 

In a Nutshell

The Rand is currently strong against the USD dollar (USD). This means that the bearish movement of the USDZAR pair is expected to continue. However, the price is approaching several support levels. If it fails to break below this level, it could bounce upwards and smash the 15.00 level. Otherwise, it will fall all the way to the yearly low. 

Disclaimer: This article is not investment advice.

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.
Harry Goldstein 2 years ago Member's comment

Excellent read, thank you.

Michael Kuchar 2 years ago Contributor's comment

Thanks, Harry. Glad you like it:)