The pound to rand (GBPZAR) pair is little changed today as investors reflect on the weak economic data from South Africa and the surging coronavirus cases. The pair is trading at 21.700, which is higher than June’s low of 20.8405.
Pound to rand reacts to rising coronavirus cases
The situation is not good in South Africa, according to the latest data from the country’s health ministry. The data showed that the number of new infections rose to more than 5,688 on Tuesday. That was the highest number ever recorded. The previous high was 4,966, which was reported on June 20.
This number comes at a time when the government is accelerating the reopening process. Indeed, a few weeks ago, the government allowed more companies to go back to work. The government has also unveiled a stimulus package worth billions of dollars. As I reported yesterday, it has unveiled a large $133 billion spending package for the next decade.
Therefore, the risk for the GBPZAR pair is that the number of infections and deaths will continue to rise. As this happens, the economic situation will worsen. According to the statistics office, factory gate prices (PPI) dropped by 0.7% in April after rising by 0.1% in the previous month. The prices rose by 1.2% on a year on year basis. The data came after the office released weak CPI and employment numbers.
The pound to rand (GBPZAR) pair has been moving in a sideways direction in the past few days. The daily chart shows that the price is a few pips above the 61.8% Fibonacci retracement level. The price is along the 50-day exponential moving averages and above the 100-day EMA. Also, the pair has formed a tight range, which is boxed below. This means that there is indecision among the bulls and bears. Therefore, the edges of this box are the key levels to watch.
If the GBPZAR pair breaks above the upper side, which is also the 100-day EMA, it will be a victory for the bulls. This will see the pair continue rising as they attempt to move to the next resistance at 22.000.
On the other hand, if the pound to rand pair moves below the lower edge and the 100-day EMA level, it will mean that bears have prevailed. This will see the price move lower as bears attempt to test the next resistance at 21.00.