GBPZAR: Pound to rand plunge continues as OECD warns on UK

The pound to rand pair was little changed today as investors digested the latest report by the OECD. The pair is trading at 21.1644, which is close to the lowest level since March this year. The USDZAR pair declined by 0.25%.

UK to be among the worst affected

According to the OECD, the US will be among the most affected countries in the world. The economy will decline by 11.5% if there is no second wave of the illness. It will contract by 14% in case of a second wave of the disease. In the G7, it will only beat France and Italy in the G7. The country will be the fourth-worst performing country in the OECD.

The risk for the UK is that the response for the pandemic was relatively slow in early days. This has seen it have the second number of deaths after the United States.

Meanwhile, on the other part of the pound to rand pair, things will also not be good for South Africa. OECD expects the South African economy to contract by 7.5% this year if there is no second wave. In case of a second wave, the organization of wealthy nations, expects the economy to contract by 8.2% this year.

The organization expects the unemployment rate to rise in the United Kingdom. In the first quarter, the rate was at 3.9% and will increase to 11.2% in the second quarter, 11.7% in the third quarter, and 14.8% in the fourth quarter in case of a second wave.

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GBPZAR technical outlook

The pound to rand pair declined to an intraday low of 21.1260 after the OECD report. On the daily chart, the price is slightly below the 50-day and 100-day exponential moving averages. The price is slightly above the important psychological level of 21.000 and is slightly above the 50% Fibonacci retracement level. This retracement connects the December 2019 low and this year’s high. Meanwhile, the RSI is slightly above the oversold level of 30. Therefore, the pair may continue with the downward trend as bears attempt to move below 21.00.

A move above this month’s high of 21.8865 will invalidate this medium-term outlook of the GBPZAR pair.

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