RAND ANALYSIS & TALKING POINTS
- Chinese optimism carries ZAR this morning as risk on sentiment prevails.
- Key inflection point looming on daily USD/ZAR chart.
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USD/ZAR FUNDAMENTAL BACKDROP
The South African rand opened the week on the front foot once again looking for its fourth straight week of weekly gains. Locally, loadshedding (blackouts) have somewhat diminished allowing for businesses to run more efficiently and if this trend is to continue the rand may gain additional traction. Overall the economy remains weak but the SARB has ensured an attractive carry trade for investors looking for added risk. This morning began with optimism between Chinese and US discussions as well as markets keenly anticipating stimulus by the Chinese government to bolster economic growth. This could have positive ramifications for the rand as a strong Chinese economy traditionally correlates to stronger demand for South African commodity products and hence a supportive function for the ZAR.
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The economic calendar from a South African perspective is relatively light this week but focus will be on the upcoming CPI print on Wednesday (see economic calendar below). Headline inflation is expected significantly lower but core inflation will carry most of the attention for investors. Core inflation has been sticky and although estimates are marginally lower at 5.2%, markets will be, looking for something more significant. If this should come to fruition, the rand may lose some ground to the greenback as easing monetary policy may ensue especially with a less hawkish Federal Reserve (possibly reaching the peak of their hiking cycle).
USD/ZAR ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
TECHNICAL ANALYSIS
USD/ZAR DAILY CHART
Chart prepared by Warren Venketas, IG
Daily USD/ZAR price action has remained below the psychological 18.2500 handle for now looking to push lower towards 18.0000 for the first time since late April this year. The Relative Strength Index (RSI) has since pushed into oversold territory and may coincide with a pullback around the long-term trendline (black) and 200-day MA (blue) respectively.
Resistance levels:
Support levels:
- 18.0000/Trendline support/200-day MA
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