The South African Rand continues to face bearish pressure this Tuesday after the government reinstated tighter COVID-19 restrictions in a bid to control the 3rd wave of the coronavirus epidemic currently sweeping the country.
The measures, which President Cyril Ramaphosa announced, are to be put in place for 14 days. South Africa has Africa’s worst coronavirus caseload and death numbers. The measures could hamper attempts to rejig the South African economy, which was already floundering before the pandemic arrived.
The Rand is also facing pressure from a resurgent US Dollar, which had gained strength after the hawkish 16 June FOMC rate statements.
Traders are also reacting to the 15-month prison sentence imposed on former South African President Jacob Zuma for contempt of court, while undergoing corruption charges, in an unprecedented move for any African government. The USD/ZAR is up 0.68% on the day.
Technical Outlook for USD/ZAR
The daily chart reveals that the pair has broken out of the bullish flag but will meet resistance at the 14.3976 mark (16/24 February lows and 21/22 June highs). This resistance must be taken out for the measured move towards 14.7170 to be actualized. The bullish move would also need to uncap the 14.5295 resistance level (cluster of lows of late December 2020 and 4 May high) in the process.
On the other hand, rejection at 14.3976 allows for a pullback which tests 14.1536 (16 April and 23 June lows). If this fails to hold, 13.97151 (23 December 2019 low) becomes a new target to the south. At this point, this move would have invalidated the flag.