The USDZAR pair is among the best-performing currency pairs in the market today. The pair is up by more than 2% and is trading at the highest level since May 29. The South African rand has also slumped against key currencies like the euro and the pound. Meanwhile, the country’s stocks are sending a different message, with the JSE Africa All Shares index rose to a five-month high.
Why is the South African rand being hammered?
To be fair, the South African rand is not the only emerging market currency being beaten-down today. The USD/TRY pair has risen by more than 3% while the Mexican peso and Brazilian real are also in the red.
The reason for the current price action is a report by Bloomberg Economics. In its report, the company said that business activity in the emerging market remained 35% below the pre-virus level. The report was done by compiling data like credit card usage and location information. In contrast, data from athe developed world shows that countries like Canada and those in the Eurozone are in a stronger recovery path.
The USDZAR is also rising because of a news report by the health office. In a statement yesterday, the office confirmed more than 8,500 new infections. That was the highest number this month. Indeed, as shown below, the trend has been falling in the past few days. Therefore, this trend means that the South African economy may take longer to recover.
USDZAR technical outlook
The USDZAR pair is trading at 17.6425, which is an important level for two reasons. First, the price is the highest it has been since May 29. The price is also above the 50-day and 200-day exponential moving averages. It has also moved above the 38.2% Fibonacci retracement level. (This Fibonacci connects the highest and lowest levels this year). Therefore, it seems like bulls have prevailed, which means that the price is likely to continue rising as bulls target the next resistance at 18.00.
On the flip side, a move below the 38.2% retracement at 17.300 will invalidate this thesis.