What is currently affecting the rand price?
In this article we look at the recent catalysts for ZAR weakness
The Rand has been on the back foot this week, as a number of catalysts dovetail to weigh on the domestic currency.
Dollar resurgence
In the US, persistently high inflation has seen more hawkish Federal Reserve, with member James Bullard suggesting that 75 basis point hikes (0.75%) must not be ruled out.
Member Bullard has gone on to suggest that rates in the world’s largest economy could even reach 3.5% by year end.
The current Federal Reserve benchmark lending rate currently sits at the 0.25% to 0.5% range.
While Bullard is known to be more hawkish than most of the other Fed members, US rates are expected to rise by 50 basis points (0.5%) at the next meeting on the 4th of May 2022.
Commodity prices
Commodity prices have seen a bit of a correction from the highs induced by the ongoing war. The retrace has in part been catalyzed by a stronger dollar and hard lockdown in China.
China’s zero tolerance treatment of Covid outbreaks sees some concern pertaining to demand from the otherwise resource hungry region.
Loadshedding and state of disaster
On the domestic front, an escalation from stage two to stage four loadshedding has weakened near term sentiment partially reflected in the rand.
The recent floods in KwaZulu-Natal has further hampered sentiment after President Cyril Ramaphosa moved the country back into a state of disaster in order to access funds in support.
Unfortunately, disaster fund management accessed from the pandemic has a dubious track record.
USD/ZAR – Technical view
The long-term trend for the USD/ZAR remains down (Dollar weakness / Rand strength), although in the short to medium term we are currently seeing a correction of this trend (dollar strength / rand weakness).
Should the correction of the long-term uptrend see the USD/ZAR price back above the 200-day simple moving average (blue line) and R15.20/$ resistance level, the downtrend would be considered to be broken.
In this scenario R15.55/$ could be the next upside resistance target considered from the move.
Should the USD/ZAR fail to break the R15.20/$ resistance level, the long term down trend would remain intact.
For now, our preference is still to look for short entry on a bearish price reversal until such time as the R15.20/$ resistance level (and 200 day simple moving average) is broken.
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