The USD/ZAR price is approaching its lowest level this year as traders react to the relatively positive data and news from South Africa. The South African rand is trading at 14.53, which is slightly above the year-to-date low of 14.38.
What happened: The USD/ZAR price declined as the market reacted to the new deal between Pfizer and the South African government. The country will receive 20 million vaccine doses from mid-April this year. In the past few months, the country has been vaccinated just 250,000 health workers using the vaccine manufactured by Johnson & Johnson. The firm has also agreed to supply more than 30m doses.
Meanwhile, the USD/ZAR also declined after the relatively strong South African PMI numbers. According to Standard Bank, the country’s PMI rose from 50.2 to 50.3 in March, in a sign that the economy is doing relatively better. Further, business confidence has also risen, albeit at a slower pace. The South African rand has also strengthened because of the relatively weaker US dollar.
The daily chart below shows that the USD/ZAR price has dropped by almost 7% from the highest level this year. Along the way, we also see that it formed a bearish flag pattern. It is now slightly above the YTD low of 14.38 and is below the short and longer-term moving averages. Therefore, in my view, the USD/ZAR is heading towards a major bearish breakout as traders attempt to test move below 14.00. However, a move above 14.80 will invalidate this trend.
South African rand chart