USD/ZAR Grinds Lower – Strong GDP Data, Dollar Weakness Lifts the Rand
USD/ZAR Talking Points
- South African GDP overshoots estimates despite political turmoil
- USD/ZAR Slides to support as Dollar weakness limits gains
- Fundamental data remains key for the EM (emerging market) currency pair as FOMC looms
USD/ZAR Falls After South African GDP Smashes Estimates
South Africa has faced a wide variety of systemic, political and economic issues that continue to weigh on the EM (emerging market) currency.
While load shedding (rolling blackouts), a potential impeachment and a struggling middle-class place pressure on growth prospects, the Rand has remained suppressed against its major counterparts.
After an independent panel ruled that SA president Cyril Ramaphosa had violated the rules outlined in the constitution last week, USD/ZAR soared.
As prices rebounded from the psychological level of 17.00, dampened sentiment allowed bulls to regain confidence, driving prices to the current monthly high around 17.96. With the current president confirming his intentions to stand firm and prove his innocence, an optimistic GDP report has assisted in driving USD/ZAR lower.
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USD/ZAR Technical Analysis
Although the safe-haven Dollar remains supported by rate expectations and a resilient labor market, recent USD weakness has restricted further gains.
After digesting the changes in the fundamental backdrop, failure to retest 18.00 allowed bears to drive USD/ZAR back towards support at prior resistance around 17.29.
USD/ZAR Daily Chart
Chart prepared by Tammy Da Costa using TradingView
However, if bulls drive prices back towards the lower bound of the rising channel from the 2021 – 2022 move, a hold above 17.56 and a move above 18.00 could fuel bullish continuation towards 18.500.
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--- 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.