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South African Rand Forecast: Global Risk Sentiment Dictating ZAR Flows

South African Rand Forecast: Global Risk Sentiment Dictating ZAR Flows

Warren Venketas, Analyst

RAND ANALYSIS & TALKING POINTS

  • Souring risk appetite hurts rand.
  • South African commodity exports does its best to limit ZAR losses.
  • R18.50/$ a very real possibility.

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USD/ZAR FUNDAMENTAL BACKDROP

The South African rand remains depressed against the U.S. dollar after the Federal Reserve’s hawkish narrative triumphed over the recent ‘Fed pivot’ reports shared by markets. More recently, escalating tensions in Ukraine have bolstered the dollar’s safe haven appeal as risk aversion overshadows riskier assets such as Emerging Market (EM) currencies including the rand. In addition, a global slowdown and recessionary fears weigh negatively on the local currency but one saving grace for the South African economy has been the energy crisis plaguing Europe. Due to lack of consistency in terms of natural gas supply, many European nations have now turned to coal usage of which South Africa is a major producer. In 2022 alone, coal exports have increased +/- 11 fold giving some support for the ZAR and with the winter months approaching, the trend may intensify.

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Earlier today (see economic calendar below) the manufacturing production statistics for South Africa beat estimates on both MoM and YoY metrics which echoes the increase in demand for certain South African commodity exports. This evening Fed speakers dominate the agenda as markets keenly await U.S. inflation data later in the week.

USD/ZAR ECONOMIC CALENDAR

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Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

USD/ZAR DAILY CHART

image2.png

Chart prepared by Warren Venketas, IG

Daily USD/ZAR price action shows bulls pushing yesterday’s fresh yearly highs at 18.2357 which is likely to be breached and expose the 18.5000 psychological resistance handle. While bearish divergence is still developing as indicated on the Relative Strength Index (RSI), there is still room for further upside towards RSI resistance (red) – coinciding with the overbought region.

Resistance levels:

  • 18.5000
  • 18.2357

Support levels:

  • 18.0000
  • 20-day EMA (purple)

Contact and followWarrenon Twitter:@WVenketas

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

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