The USDZAR pair is up by almost 1% today, continuing a bullish trend that started on July 28. The South African rand has fallen against the Us dollar in the past six consecutive days and is now at the lowest level since June 30. The currency has had its longest losing streak since February this year.
Before the current weakness, the South African rand, which is the world’s second-most volatile currency in the world was in a strong upward trend against the dollar. For one, the USDZAR managed to move from a historic high of 19.3290 in March to a low of 16.34 in July. This decline was mostly because of the weaker US dollar. Indeed, the US dollar index has been in a freefall, leading to its worst month in years.
A key challenge for the South African economy is that the number of new infections are continuing to rise, albeit at a slower pace. According to Worldometer, the country confirmed more than 5,300 new cases yesterday, which was better than the July peak of near 14,000.
Meanwhile, there are concerns about whether commodity prices will continue to rise. Higher gold and palladium prices are usually viewed as positive for the rand because South Africa is a leading exporter. Nonetheless, the metals remain at their highest level and there is a probability that gold will hit $2,000.
At the same time, hedge funds and other speculators are increasing their bearish bets on the South African rand. According to Bloomberg, the forward one-month implied volatility for the USDZAR pair spiked to the highest level in six months. At the same time, the 25-delta risk reversal expanded to 225, the highest level since June 26. And, according to CFTC, the net speculative long-rand contracts declined for a second week in a row.
USDZAR technical forecast
A closer look at the daily USDZAR chart shows that the pair has been in an upward trend for the past six days. Interestingly, the pair has moved above the closely-watched 50-day exponential moving average. It remains above the 100-day EMA.
Another interesting fact is that the price has just moved above the 38.2% Fibonacci retracement level. This Fib connects the highest and lowest levels this year. Another interesting thing on the USDZAR pair is that the price is approaching the previous resistance at 17.5327. Therefore, the price is likely to continue rising as bulls approach this level.
On the flip side, a move below 16.500 will invalidate this trend. This price is along the 200-day EMA and the lowest level in July.