The USD/ZAR pair declined slightly as hopes rose that South Africa will reopen its economy soon. The pair declined even as the US dollar index rose by more than 30 basis points.
South Africa starts to reopen
There are hopes in the financial market that South Africa is opening up well. These hopes were brought by the parliament’s trade, industry, and competition committee, which said that the country will swiftly move to level 3 restrictions in the near term.
The levelling system was announced by Cyril Ramaphosa, when he delivered a televised speech two weeks ago. Level five involved the most drastic measures to control the virus such as a national lockdown. The current fourth level allowed some business such as some manufacturing and retail to resume.
The third phase will ease many restrictions on workplaces and socially while the second phase will involve social distancing in most places. Finally, the first level will allow most activities to resume.
Still, there is a risk of an increased number of new infections. In fact, according to Worldometer, the number of new infections rose by 447 yesterday. This was the highest jump on record. Similarly, the number of active cases and deaths have continued to rise.
US economy deterioration
The USD/ZAR market is also concerned about the weak economic data from the United States. Last week, data showed that more than 3.8 million Americans filed for jobless claims in the previous week. This means that more than 30 million Americans have been forced out of work. Another data from ISM showed that the manufacturing PMI dropped to a record low of 41.5.
While this was better than the expected decline of 36.5, it also showed how weak the economy is. In the same month, manufacturing prices declined to 35.3 from the previous 37.4. Other numbers from the US like retail sales, inflation, and service PMI has dropped to record lows.
On the four-hour chart, we see that the USD/ZAR pair declined slightly and is trading at 18.800. We also see that the pair found important support at the important level of 17.9860. The pair also managed to move above the 23.6% Fibonacci retracement level of 18.3378. Also, we see that the pair is finding some resistance at the current level. Therefore, I expect that bulls will attempt to retest the previous resistance level at 19.1800.
On the other hand, a move below 18.500, which is the 100-day EMA, will send a signal that there are still sellers in the market.