USD/ZAR ANALYSIS

  • Encouraging signs for US stimulus package
  • USD/ZAR holds steady at 16.5000 confluence zone
  • Upcoming US inflation figures later today

After a week of ups and downs, primarily prompted by US stimulus package discussions the USD/ZAR pair has fallen as hopes for additional stimulus is back on the table. President Donald Trump has adjusted from his initial $1.6 trillion figure to a revised figure of $1.8 trillion. Unfortunately, Democrats opposed the amendment which has led to uncertainty reflective in recent Emerging Market (EM) currencies including the USD/ZAR.

Still, hopes remain for a stimulus package to be implemented before US elections conclude which could extend support to EM’s.

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USD/ZAR TECHNICAL ANALYSIS

USD/ZAR daily chart:

USD/ZAR daily chart

Chart prepared by Warren Venketas, IG

Last week Friday USD/ZAR tested the 16.4000 support zone as the pair fell to 16.4020. Since then, bulls have gradually clawed back prior losses to the 16.5000 psychological level. Price action continues to trade within the multi-month range bound movement (green), as USD/ZAR remains at the lower bound. The daily chart above suggests a diagonal trendline support (dashed black line). This could reveal further downside if support is broken below or a bounce off may lead to a push toward the recent swing high (16.7520).

USD/ZAR 4-hour chart:

USD/ZAR 4 hour chart

Chart prepared by Warren Venketas, IG

The 4-hour chart shows several Doji candles appearing since Sunday’s open, indicative of uncertainty at this level amongst market participants. Price has since pushed above toward topside diagonal resistance (blue) which is being respected as bears push price back toward 16.5000.

October has revealed a near term range between 16.4000 and 16.7520 which would by likely support and resistance markers respectively. Depending on market inclination (bias), these two levels should be kept in mind for price swings away from the established 16.5000 zone.

UPTICK IN LOCAL CORONAVIRUS CASES

With stricter lockdown measures being employed in Europe after a second wave of COVID-19 cases, South Africa may be on track for a similar outcome. After stage 1 of the national lockdown, the South African public has become rather relaxed around virus protocols which could be reflective in the recent noteworthy spike in COVID-19 cases.

If cases continue to grow, South Africa could be faced with the tough decision of ensuring public safety which could cause further detrimental repercussions for an already struggling economy.

USD/ZAR: ECONOMIC EVENTS

Upcoming economic data includes South Africa Manufacturing Production today at 11:00 GMT which could provide a tailwind for ZAR bulls if figures come in better than expected. Positive figures are expected after the ABSA PMI rose to 57.5 in September.

More significant news is expected out of the US this week with US inflation data expected tomorrow (12:30 GMT).

With South Africa currently under eased lockdown conditions, Retail Sales which are expected to decline at a lesser rate than the previous 9% YoY for August should hold. Over the coming months consumer spending is expected to increase at a gradual pace.

DailyFX Economic Calendar:

dailyfx economic calendar

USD/ZAR: KEY POINTS TO CONSIDER MOVING FORWARD

The week ahead may see further Rand appreciation if the current risk-on sentiment is maintained along with a weaker US Dollar. With many economic announcements this week, large variations in forecasts could cause substantial market swings.

  • 16.5000
  • Diagonal support
  • US stimulus negotiations
  • Expected rise in volatility
  • South African pandemic data

— Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas

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