South African Rand Forecast: ZAR gains traction after U.S. GDP miss
South African PPI shows no sign of letting up and USD/ZAR bears garner favor.
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USD/ZAR fundamental backdrop
The South African rand gave back some of its gains today after the kneejerk reaction seen across global markets post-Fed. The expected 75bps interest rate hike received a dovish reaction but this does not mean I am bearish on the U.S. dollar particularly with recessionary fears looming. The U.S. GDP release missed estimates coming in at -0.9% for Q2 meaning we are in a ‘technical recession’ after the -1.6% Q1 print. One positive is the reduction in core PCE prices which could be attributed to the Fed’s aggressive tightening cycle.
From a South African perspective, PPI figures came in higher than expected adding to ZAR strength in early trading while the U.S. GDP miss flagged a slowing U.S. economy thus adding to downside pressure on the greenback. Because the rand is so highly correlated to China, the U.S. decline did not spark risk aversion from the ZAR.
USD/ZAR economic calendar
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Technical analysis
Daily USD/ZAR price action shows bears taking charge pushing towards the 16.5000/50-day EMA (blue) support zone. The Relative Strength Index (RSI) has also pierced below the midpoint 50 level indicative of increasing bearish momentum.
Resistance levels:
- 17.0000
- 20-day EMA (purple)
Support levels:
- 50-day EMA (blue)
- 16.3547 (38.2% Fibonacci)
USD/ZAR daily chart
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This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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