South African Rand Outlook: Global Sentiment Continues To Govern ZAR

This week has been a rollercoaster for the USD/ZAR pair as a plethora of fundamental factors were revealed. From a South African perspective there has been a postponement of unemployment data, marginally lower than expected inflation figures for September (YoY) and the Medium Term Budget Policy Statement (MTBPS) by Finance Minister Tito Mboweni.

The much talked about US stimulus package has been abandoned in terms of a pre-election release, while upcoming US elections remains at the forefront of the global political landscape. Positive US Q3 GDP (QoQ) numbers yesterday reflected in a risk-seeking mood with the Rand outshining its Emerging Market (EM) counterparts.

Increasing COVID-19 cases persist across Europe, Russia and the United States leading to revised lockdown measures in various countries.

This has been represented in a choppy week for USD/ZAR with price swings of roughly 40 cents (ZAR). Despite a poorly received MTBPS and the global pandemic, the Rand has remained resolute with sustained appetite for risk which remains within the USD/ZAR multi-month downward trajectory.

According to a statement released by Fitch Ratings, “Fitch kept South Africa's rating on Negative Outlook following the downgrade to 'BB' in April, partly due to the prospect of further significant pressure on government debt.”


USD/ZAR weekly chart

Chart prepared by Warren Venketas, IG

The weekly chart above reflects a possible descending triangle formation however, the triangle is preceded by an uptrend as opposed to the textbook downtrend. Typically, a descending triangle pattern is a bearish continuation pattern which could see further ZAR appreciation.

New support may be established at the 16.1000 zone as the price pushed off this level after uncertainty around US stimulus negotiations. If the week ends above 16.1000 it may be assumed that this support zone will be recognized going forward and provide the basis for the completion of the triangle pattern.

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