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Rand Dollar (USD/ZAR) Tests Key Levels as Risk Sentiment Waivers

Rand Dollar (USD/ZAR) Tests Key Levels as Risk Sentiment Waivers

Tammy Da Costa, Analyst

USD/ZAR Price Forecast:

  • USD/ZAR tests psychological resistance
  • Risk-sentiment remains a primary driver of price action
  • Prices Action temporarily stalls, with Fibonacci Retracement levels holding both bulls and bears at bay
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The South African Rand continues to maintain a degree of resilience against the greenback, despite an increase in the demand for safe-haven currencies ensuing from fresh global lockdowns.

Visit the DailyFX Educational Center to discover why news events are Key to Forex Fundamental Analysis

In recent weeks, a rise in US treasury yields has bolstered demand for the US Dollar, a primary catalyst for USD/ZAR price action. With a negative correlation existing between the safe-haven greenback and Emerging Market (EM) currencies, rising yields continue to weigh on the volatile Rand, driving risk sentiment and in turn, pressurizing the downward trajectory which has persisted since April last year.

Meanwhile, SA’s economic woes have been exacerbated by the pandemic, with established political and economic obstacles hindering the developing nation’s ability to provide support to citizens who have suffered from the implications of Covid-19 restrictions, shedding light on the extensive income disparities existing within South Africa’s economic realm.

USD/ZAR Technical Analysis

With investors constantly monitoring South Africa’s economic and political environment, global optimism will likely continue to drive risk sentiment for the foreseeable future. Although expectations of a robust US economy has enabled the bulls, allowing them to drive price action above the key psychological level of 15.00, increased demand for Platinum and Gold has kept bulls at bay, allowing prices to remain below the descending trendline with key Fibonacci retracement levels from the 2018 – 2020 move encapsulating price action and forming a zone of confluency that will likely continue to influence the systemic, pertinent trend.

USD/ZAR Weekly Chart

Rand Dollar (USD/ZAR) Tests Key Levels as Risk Sentiment Waivers

Chart prepared by Tammy Da Costa using IG charts

For now, prices continue to trade within a well-defined range, with the 50% Fibonacci retracement of the above-mentioned move holding firmly at 15.44, whilst support remains at the psychological level of 15.00. If bears are able to drive prices lower, the next level of support can be seen at 14.50, the 61.8% retracement level which has held bears at bay for much of this year.

Additionally, the recent Moving Average Convergence/Divergence (MACD) crossover below the zero line may be suggestive that upward pressure may drive prices higher but a series of shallow candles is indicative of indecision, with risk-sentiment remaining as a key catalyst for the imminent move.

USD/ZAR Daily Chart

Rand Dollar (USD/ZAR) Tests Key Levels as Risk Sentiment Waivers

Chart prepared by Tammy Da Costa using IG charts

--- 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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