USD/ZAR analysis

  • Beginnings USD The boost comes after Trump’s COVID announcement.
  • Rand holds steady ahead Non-Farm Payrolls (NFP)
  • Expected rise in U.S. election volatility could affect ZAR’s appeal.

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The South African rand has been in positive territory for five straight days this week, appreciating about 3.25% against the dollar. dollar . Today has changed the tone of global market sentiment as President Trump announced that the First Lady and himself are COVID-19 positive. This has resulted in a systemic impact across global markets with investors going on the defensive. Global stock indices are down this morning and traditional safe haven assets (spot gold, yen) are up throughout the day.

The Volatility Index (VIX) spiked to +/-9% but has since retreated. This unexpected announcement demonstrates the Sands’ sensitivity to the global economy and risk appetite, as investors are moving away from riskier assets.

USD/ZAR technical analysis

 

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USD/ZAR daily c hart:

USD/ZAR daily chart

Charts and graphs prepared Warren Venketas , IG

daily USD/ZAR The chart above shows the respective diagonal resistance lines (blue) for prices. USD/SA Rand bulls have tried to break this resistance line three times, but have failed. Since June 2020, the rand has been trading in a range between the 38.2% 16.3444 and 23.6% 17.4888 Fibonacci levels. However, with the diagonal resistance line (blue) working in the mid-range, the upper edge of each range may not see any short to medium-term Price Action .

If USD/ZAR appreciates due to better than expected. NFP Data or safe haven appeal, initial resistance can be expected to re-emerge at diagonal resistance levels. The Green Support Zone (around 16.5500) has been a key crossover zone since late August and a break below it could see USD/SSA bears eyeing the 16.5000 psychological level.

South Africa’s Rand has a strong week but still faces a high level of struggle.

South Africa has seen a number of positive, high-impact economic events over the past week, with the rand gaining traction and support from global investors. Better-than-expected unemployment rate and trade balance Numbers. There are overhead The zloty exchange rate fell to its current level. South Africa provided a trade surplus (exports > imports) of 38.87 billion rand, compared to an estimated 29.7 billion rand. The relatively weak rand due to the global pandemic could be a big contributor, as locally produced goods become “cheaper” for foreign buyers.

These positive economic factors have proved encouraging for the South African Rial, but going forward, structural reforms and the ongoing fight against corruption will be key to bringing the currency back to pre-COVID levels. While the Emerging markets (EM) The currency is heavily influenced by global market conditions, but the South African rand can increase investor confidence by countering negative volatility with sound economic policies and implementation.

The U.S. Stimulus, Nonprofits, and President Donald Trump

Hopes of additional stimulus measures from the US provided a headwind for the South African rand, making the local currency one of the best-performing emerging market currencies this week. However, with the US President testing positive for the coronavirus, this could hinder progress in the coming weeks as market participants await the President’s future approach.

The United States is arguably the most influential country in the world with respect to financial markets, and this announcement is likely to perpetuate the risk aversion evident in today’s markets. President Trump’s ability to lead the country is perceived to be disrupted and investors could flock to safe haven assets. The Rand could be negatively impacted, and that impact could last through the U.S. election.

Non-farm payrolls will be released later today (12:30 GMT), with 875,000 jobs expected to have been added last month. This is likely to be pressured by the US election, Trump’s announcement of COVID and the Fed’s average inflation targeting policy (AIT). However, based on Bloomberg’s whisper function, market participants may be focusing on a significantly larger 1,000k in new jobs. this potentially higher payrolls number could prove supportive for the dollar.

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USD/ZAR: Key Points to Consider Moving Forward.

Next week investors will focus on the upcoming FOMC minutes and the impact of the virus on President Trump’s leadership and campaign. As there will be no expected announcements or data releases from South Africa next week. USD/ZAR Investors should pay close attention to global risk events and focus more on the US.

  • diagonal resistor
  • 16.5500 support area
  • NFP data to be released soon
  • Expected fluctuations throughout October

— By Warren Venketas for DailyFX.com.

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2020-10-02