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South African Rand Forecast: USD/ZAR, EUR/ZAR, GBP/ZAR Setups

South African Rand Forecast: USD/ZAR, EUR/ZAR, GBP/ZAR Setups

2020-09-04 09:30:00
Tammy Da Costa, Markets Writer
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ZAR Outlook:

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Rand Strength Falters as Darkness Resumes

It’s been less than a month since South Africa eased lockdown restrictions, as the Coronavirus pandemic placed the emerging market deeper into a recession. Despite the resumption of business activity, hopes of an economic recovery appear dismal after power utility, Eskom, struggles to keep up with electricity demands, leading to the reimplementation of rolling blackouts.

USD/ZAR Technical Outlook

In recent weeks, the ZAR has managed to strengthen against it’s USD counterpart, buoyed by recent US Dollar weakness. However, the momentum of the downward trend slowed after reaching 16.5500, falling short of the psychological level of 16.5000. A consolidation in prices has now occurred, with price action falling into what may be a bearish triangle pennant, suggesting that a bearish continuation may still occur, with prices remaining below the 50-Day Moving Average (MA).

The release of US Non-Farm Payroll data (NFP), at 12.30 GMT, may be an additional driver for price action, increasing volatility amongst the pair. Bearing that in mind, a break above the triangle may see prices increasing to the next level of resistance, the psychological level of 16.8000 while a break below, could see further downward pressure on USD/ZAR, towards 16.64544, the 50% Fibonacci Retracement level (December 2019 low to April 2020 high).

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USD/ZAR Daily Chart

USD/ZAR Daily Chart

Chart prepared by Tammy Da Costa, IG

EUR/ZAR Technical Outlook

EUR/ZAR continues to hover around 19.73504, the key level of support, at the 50% Fibonacci retracement level. Meanwhile, the Moving Average Convergence/Divergence (MACD) is on the verge of crossing below the zero-line, a possible indication that bearish momentum may be leveling out.

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EUR/ZAR Daily Chart

EUR/ZAR Daily Chart

Chart prepared by Tammy Da Costa, IG

GBP/ZAR Technical Outlook

GBP/ZAR appears to be stuck at the 23.6% retracement level of, taken from the July 2019 low to May 2020 high, which has been a strong level of support since the 50-day MA crossed above the 100 -day MA on 24 August 2020. Although prices remain above the Moving averages, suggesting the upward momentum may prevail, bulls will need to break above this level of support if they want to return to August levels. If upward momentum resumes, the next level of resistance may hold at 22.200, while a break below support may lead to reversal towards the downside, with 22.000 forming as support.

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GBP/ZAR Daily Chart

GBP/ZAR Daily Chart

Chart prepared by Tammy Da Costa, IG

--- Written by Tammy Da Costa, Market Writer for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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