Rand Dollar Forecast: USD/ZAR Dances Sideways Into The New Year

SOUTH AFRICA’S SOMBER AND SOBER OLD YEAR’S EVE

South Africa is now facing the wrath of the second wave of the coronavirus pandemic, with the discovery of the new variant and the implications of tighter restrictions weighting heavy on the Rand. Even though the economy is still facing the crippling effects of the first national lockdown, where corruption, income disparities, and cracks in the country’s political system became apparent; the rapid surge in new cases has resulted in stricter restrictions, including another alcohol ban, an industry accounting for a large portion of South Africa’s Tax Revenue.

Meanwhile, US Dollar weakness continues to prevail, catalyzing the demand for Emerging Market (EM) currencies and capping the gains of bulls trading USD/ZAR.

USD/ZAR TECHNICAL ANALYSIS

USD/ZAR continues to trade below the key psychological level of 15.00, buoyed by USD weakness. However, price action appears to be confined at a key level of support at 14.488, formed by the 61.8% Fibonacci retracement level of the move between 2018 and 2020. On the weekly chart, the Relative Strength Index (RSI) is bordering 30, potentially indicating that the pair may still be entering into oversold territory.

USD/ZAR Weekly Chart

USD/ZAR Weekly Chart

Chart prepared by Tammy Da Costa, IG

Meanwhile, on the daily chart, price action remains within the confluent zone formed by the descending trendline and current support.

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 50% Fibonacci level providing resistance at 15.417.

USD/ZAR Daily Chart

USD/ZAR Daily Chart

Chart prepared by Tammy Da Costa, IG

Disclosure: See the full disclosure for DailyFX here.

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