USD/ZAR Outlook: Rand Resilient Despite Revealing Quarterly Bulletin

RAND FUNDAMENTAL BACKDROP

Yesterdays Quarterly Bulletin exposed many underlying flaws in the South African economy, however, this did not deter the Rand which is currently up 0.74% against the U.S. Dollar. Some key points that should be highlighted:

  • Higher borrowing by the government was financed primarily through the issuance of domestic long-term government bonds
  • As a percentage of GDP, gross loan debt increased from 62.2% to 77.1%
  • Rand continues to fluctuate alongside global risk sentiment
  • Inflationary pressures remained muted

In addition, short-term Rand pressure was supplemented by the upcoming restrictions over the Easter weekend which was addressed by President Ramaphosa last night. Tighter alcohol limitations were introduced in an attempt to curb further COVID-19 infections and a possible third wave.

The U.S. President Joe Biden will be in focus as well with his speech around the details of the economic recovery package focusing on infrastructure and manufacturing. This is likely the major contributing factor for Rand strength this morning regardless of climbing U.S. 10Y Treasury yields.

USD/ZAR ECONOMIC CALENDAR

Several key announcements are scheduled for this week with NFP on Friday. Expect some volatility pre and post-announcements which demands heightened awareness and sound risk management on trade positions.

ZAR economic calendar

USD economic calendar

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

USD/ZAR WEEKLY CHART

USD/ZAR weekly chart

Chart prepared by Warren Venketas, IG

USD/ZAR extends its movement within the medium-term rectangle pattern (yellow). Last week's candle close below the 15.0000 psychological levels has dampened any upside this week as the Rand pushes lower. Although a breakout may be months away, many potential catalysts could spark a quicker-than-expected price break.

USD/ZAR DAILY CHART

USD/ZAR daily chart

Chart prepared by Warren Venketas, IG

The daily chart above shows the short-term support trendline (black) looming which could provide a springboard for prices to push upward. If this trendline is breached, the March 17 swing low at 14.6131 will serve as initial support target followed by the 14.5000 key level.

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