The USDZAR pair is up slightly today after four consecutive days in the red. The pair is up by 0.30% and is trading at 17.4200, which is a few pips above the intraday low of 17.3220.
The South African rand has been in an uptrend after falling to 17.800 on August 10. The gains are mostly because of the ongoing trend in coronavirus cases infections. According to Worldometer, the number of daily infections has fallen from a high of 13,944 on July 24 to a low of 3,692 yesterday. The number of active cases has fallen to the lowest level since July 8 while deaths have increased to more than 10,000.
In an address made during the weekend, Cyril Ramaphosa, the country’s president said that restaurants, bars, and retail outlets will start being allowed to sell alcoholic beverages.
Still, the challenge for South Africa is that the economy has been affected significantly in recent months. Data released last week showed that manufacturing production, mining output, and retail sales have been disappointing.
This is important because manufacturing and mining contributes about a fifth of total GDP. The central bank expects that the economy will drop by 32.6% in the second quarter after dropping by 2% in the first quarter. That will be the third consecutive quarters of the economy being in the red. Worse, Business Leadership South Africa, has rubbished the new economic plan presented by the government. The CEO of the lobby group said:
“It appeared to have been pulled together at the last minute from a variety of different sources without any discussion between them.”
The daily chart shows that the USDZAR pair reached a high of 17.7637 on August 10. Since then, the price has dropped to last week’s low of 17.3220. This price is slightly above the 50-day and 25-day exponential moving averages. It is also slightly above the 38.2% Fibonacci retracement level. The price is also above the descending trend line that is shown in black.
Therefore, the outlook for the USDZAR pair is neutral. A move below the 50-day and 25-day EMA at about 17.20 will mean that bears have prevailed, which will see the price continue to fall. However, a move above last week’s high of 17.7637 will mean that bulls have prevailed, which will see the price continue rising.