South African Rand Forecast: USD/ZAR, GBP/ZAR,EUR/ZAR Price Setup

FUNDAMENTALS AND FEAR COLLIDE

Despite an increase in global risk sentiment and higher demand for Emerging Market currencies (EM), the downtrend pertaining to the South African Rand against major currency pairs has lost momentum, forming a penchant for mean reversion. This follows the discovery of a new variant of COVID-19, linked to South Africa, that has resulted in the implementation of travel bans by multiple nations on both the United Kingdom and South Africa, hindering hopes of a swift economic recovery, unless a vaccine can be rolled out on an international scale in the foreseeable future.

Meanwhile, fundamentals continue to be an additional driver of price action as Brexit negotiations and the US Stimulus package continue to get priced into the markets, with bulls and bears torn between fundamentals and fear.

USD/ZAR TECHNICAL ANALYSIS

USD/ZAR has continued to trade below the psychological level of 15.00 with price action stuck in a confluent zone between the descending trendline and level of support which has formed at 14.55. Although the Relative Strength Index (RSI) remains above 30, the pair continues to linger in oversold territory while trading well below the 55-period Exponential Moving Average.

If support is broken, selling pressure may resume into the new year, with bears eager to test January 2020 levels, when the pair traded at 13.923. On the contrary, an increase in demand for safe-haven currencies may result in US Dollar strength, driving price action above the trendline, with the 76.4% Fibonacci level providing resistance at 15.193.

USD/ZAR Daily Chart

USD/ZAR Daily Chart

Chart prepared by Tammy Da Costa, IG

GBP/ZAR TECHNICAL ANALYSIS

After months of negotiations, talks of a post-Brexit trade deal boosted the demand for GBP against its major counterparts. However, gains were limited as the new travel bans and growing Covid-19 cases weighed on both Sterling and ZAR.

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