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USDZAR

USD/ZAR: FUNDAMENTAL FORECAST | PRICE ACTION | SHORT SCENARIO 🔔The South African Current Account for the first quarter is predicted at ZAR182.1B, and the Current Account Percentage of GDP at 3.55%. Forex traders can compare this to the South African Current Account for the fourth quarter, reported at ZAR197.7B, and to the Current Account Percentage of GDP at 3.70%. South African Mining Production for April is predicted to increase by 105.0% monthly. Forex traders can compare this to South African Mining Production for March, which increased by 21.3%. US Initial Jobless Claims for the week of June 5th are predicted at 370K, and US Continuing Claims for the week of May 29th are predicted at 3,602K. Forex traders can compare this to US Initial Jobless Claims for the week of May 29th, reported at 385K, and to US Continuing Claims for the week of May 22nd, reported at 3,771K. The US CPI for May is predicted to increase by 0.4% monthly and by 4.7% annualized. Forex traders can compare this to the US CPI for April, which increased by 0.8% monthly and by 4.2% annualized. The US Core CPI for May is predicted to increase by 0.4% monthly and by 3.4% annualized. Forex traders can compare this to the US Core CPI for April, which increased by 0.9% monthly and by 3.0% annualized. Volatility may increase after today’s CPI report out of the US and with the CCI moving higher, but the downtrend is intact.US Dollar weakness is expected to continue, but will bears take advantage of the momentum and pressure the USD/ZAR into its next horizontal support area?
Short
by FOREXN1
3
South African Rand Follows ThroughThe Financial Post had the following to say to try to explain the fresh strength in the South African rand (USD/ZAR): "With the local economy remaining weak and facing power cuts, the rand’s recent rally has been mainly on the back of global factors, including higher commodity prices which benefit resource-rich South Africa and expectations U.S. lending rates will stay lower for longer." This explanation falls well short of the longer-range dynamics benefiting the rand on this foollow-through move for a longer USD/ZAR downtrend. Commodity prices are soaring, and South Africa is a direct beneficiary. More importantly, the South African central bank expressed great confidence in the economy in mid-April. I posted the following at the time including key economic charts: South African Rand Boosted By Central Bank Confidence Last November, the South African rand (USD/ZAR) finished reversing its pandemic related losses against the U.S. dollar. Along the way I pointed out the benefits of getting long the South African rand. This week, USD/ZAR dropped to levels last seen in January, 2020. The rand looks to strengthen further based on the confidence expressed by South Africa’s Reserve Bank Governor Lesetja Kganyago in a recent Reuters interview. In the interview, Kganyago expressed confidence that investors will remain interested in buying high-yielding South African bonds even as monetary policies start to normalize (higher rates) around the globe. Moreover, South Africa enjoys a real rate advantage over other emerging market countries given South Africa’s success in containing inflation. Higher bond yields attract capital inflows and boost the domestic currency. The following quote convinced me of Kganyago’s determination to contain inflation: “High inflation perpetuates inequality..Those who are rich can buy assets to protect themselves from inflation, they can buy shares and bonds and property. But those who are earning fixed incomes, whether a salary or a government social grant … if inflation erodes it you have to wait for the next increase.” The South African Monetary Policy Forum The Reuters interview likely came after the Reserve Bank released its April report monetary policy (the “Monetary Policy Forum”): the commentary in the interview supported themes from the report. The report reflected Kyganyago’s confidence. For example, here are some of the Reserve Bank’s main points: Global recovery stronger on vaccination & stimulus Domestic recovery on track, some sectors constrained SA inflation well-contained… balanced risks Gradual normalization with low inflation {The South African Reserve Bank is confident in a future of well-contained inflation.} I was most impressed with the strength in South Africa’s terms of trade. The country’s terms of trade broke out in late 2019 and has trended sharply higher since then. The trend managed to to stay strong through the pandemic with a slowing in Q4 of 2020. This overall strength bodes well for the post-pandemic recovery in South Africa. {The prospects for the South African economy look good with an uptrending terms of trade.} The Trade in the South African rand The strong terms of trade particularly support a strong currency with surging commodity prices leading the way. Combining with a high yield, the South African rand is an attractive currency trade. I missed the last round of downward pressure on USD/ZAR, but I am on alert to fade the next bounce. Ideally, I can start a new position short USD/ZAR on another test of declining resistance at the 20-day moving average (DMA) and/or the 50DMA. Be careful out there!
Short
by drduru
USDZAR updateI may be forced to change my view of a drop towards 13.20 if the pair fails to close this week below 14.00. A break above the 30-day MA rate of 14.25 will allow the pair to move into a range between the 200-week MA rate of 14.55 and the 61.8% Fibo rate of 14.51. A close above 14.51 will invalidate the move towards 13.20. The MACD indicator is working into a wedge which shows that the rand's run is maturing and their is clear bullish divergence on the RSI indicator. For now we remain in a tentative range between 14.00 and 14.20.
by GustavFourie96
1