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South African Rand Dollar Update: Evergrande, Commodities & Key Levels for USD/ZAR

South African Rand Dollar Update: Evergrande, Commodities & Key Levels for USD/ZAR

Tammy Da Costa, Analyst

USD/ZAR Outlook:

  • USD/ZAR tests critical support after Evergrande payment boosts demand for Emerging Market (EM) currencies
  • Commodity prices and the bond payment by Evergrande support the Rand
  • US jobless claims falls to lowest level in nine months capping USD/ZAR losses

Evergrande, Commodity Shortage & Risk Sentiment Support the South African Rand

Over recent weeks, increased geopolitical tensions and supply constraints have supported commodity prices boosting demand for the South African Rand.

With China’s property giant Evergrande briefly escaping a default on one of their bonds, temporary relief boosted demand for emerging market currencies, allowing bears to drive prices back towards 14.60.

However, with the Federal Reserve under immense pressure to begin tapering in an effort to combat rising inflation, the release of positive US jobless data hindered bears ability to drive prices lower amid increased prospects of rate hikes.

USD/ZAR Technical Analysis

With rising commodity prices supporting the volatile Rand, USD/ZAR has managed to break below 15.00 as bears drove prices back towards 14.60 which has continued to hold bears at bay.

While key Fibonacci levels of both historical and short-term moves have continued to provide both support and resistance for the pair, the formation of a spinning top on the weekly chart may be suggesting that a breakout towards either side may be probable in the foreseeable future.

USD/ZAR Weekly Chart

USDZAR Weekly Chart

Chart prepared by Tammy Da Costa using TradingView

Meanwhile, on the daily time-frame, price action currently remains encapsulated by the falling channel that has formed since retracing from the October high. After falling to the 23.6% Fibonacci level of the August-September move at 14.37, a stronger US Dollar allowed bulls to drive prices momentarily higher before finding support at around 14.60.

USD/ZAR Daily Chart

South African Rand Dollar Update: Evergrande, Commodities & Key Levels for USD/ZAR

Chart prepared by Tammy Da Costa using TradingView

For now, critical support currently continues to hold at the key psychological level of 14.60 with a break below bringing 14.30 back into play.

Contrary to this, a break above 14.78 (the 23.6% Fibonacci resistance level of the 2020 – 2021 move) could see bulls retesting 15.00 before driving prices back to the August 2020 high at 15.39.

--- Written by Tammy Da Costa, Analyst 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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