Rand price firmer, but a busy week of data awaits
In this article we highlight why the ZAR may be trading firmer at present and take a look at key factors at play this coming week.
The rand has had a good start to the month gaining significantly against the majors (USD/ EUR, GBP and CHF).
Short term gains in the domestic currency have followed an improved near term risk appetite, softening of the US dollar and rise in commodity prices, particularly metal prices.
Commodity prices have been given a lift following recent news from China. The region has recently unveiled a 50 point plan to help spur economic growth within the region. China is now also accelerating the reopening of its economy from what has been a prolonged lockdown. This speaks to a return to demand side assumptions from the world’s second largest economy and largest consumer of metals.
Local and international catalysts to watch
It is a busy week scheduled in terms of economic data which is likely to catalyse some directional influence in the ZAR.
Key data points to watch will be:
- Tuesday: Q1 2022 Gross domestic Product (GDP) data, expectations are for quarter on quarter growth of 1.2%
- Thursday: Q1 2022 Current Account data, expectations are for the surplus to have lowered to 1.6% of GDP
- Thursday: European Central Bank (ECB) monetary policy meeting, statement and press conference. Markets are expecting the ECB to confirm the commencement of rate hikes from July this year
- Friday: US Consumer Price Index (CPI) and Core CPI data expected. While not the Federal Reserve’s Primary reference point to inflation, it will be important nonetheless. Expectations are for CPI and Core CPI in May (on an annualized basis) to come in with readings of around 8.3% and 5.9% respectively
USD/ZAR – Technical View
The bullish price reversal circled blue looks to be failing as the USD/ZAR now tests the R15.30/$ mark. A close below this level would see R15.15/$ and R15.05/$ as further downside support targets from the move.
Traders hoping to reestablish a long bias to trades on the currency pair might now prefer to wait until we see at least a move above the red trend line on our chart.
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