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USD/ZAR: South African Rand Rally Has More Room to Run – Chart


The vicious rally of the South African rand has hit a wall. The USD/ZAR pair is trading at 15.312, which is a few pips above last week’s low of 15.0960. Still, going by the predicted weakness of the US dollar, there is a possibility that the rand will continue to strengthen.

Analysts are generally bearish about the US dollar. In an interview with Bloomberg on Tuesday, a Goldman Sachs analyst predicted that the US dollar will fall by 6% in 2021.

He is not alone. Mike Wilson, an analyst at Morgan Stanley believes that the currency will weaken by more than 10% in the coming year. JP Morgan has sounded bearish on the currency as well.

And with Joe Biden set to become president, the dollar could weaken further too, according to a note by a Mitsui analyst. He said:

“On the whole, the new U.S. economic team under President Biden will be dovish, if not directly pursing a weaker dollar per se,”

In my technical analysis on the US dollar index yesterday, I also found that the outlook remained bearish. I concluded that it will possibly move below the psychological level of $90.

Therefore, a weaker US dollar will be bearish for the USD/ZAR pair in the longer term. For today, the pair will possibly react mildly to the ISM non-manufacturing PMI and US jobless claims. These numbers will come out ahead of the official nonfarm payroll numbers from the United States.

USD/ZAR technical outlook

Turning to the daily chart below, we see that, in the long-term, the USD/ZAR price has been in an overall downward trend. It has fallen by 21% from its YTD high of 19.32. The downward trend is still supported by the moving averages, the descending trendline, and the awesome oscillator.

Therefore, the strength of the South African rand will remain so long as the USD/ZAR is below the 16.00, which is at the intersection of the descending trendline and the 50-day EMA.

South African rand technical chart