The USDZAR pair slumped today as investors awaited the central bank decisions from South Africa and the United States. The South African rand strengthened as the market learned that the ruling ANC party had stalled the process of nationalising the central bank.
The USDZAR declined sharply as the overall sentiment on the US dollar soured ahead of the Fed interest rate decision that will come out at 6pm GMT. Ahead of the decision, the dollar has slumped against most developed and emerging market currencies. It is down by more than 0.50% against the pound and by more than 0.25% against the Japanese yen. That is because analysts expect the Fed to warn about the state of the American economy now that congress has struggled to pass another stimulus bill.
The South African rand is also gaining ahead of the interest rate decision by the SARB that will come out tomorrow. Like with the Fed, analysts don’t expect any meaningful change to the bank’s policies at this meeting. Meanwhile, traders are also reacting to news that the ruling ANC party has stalled the process of nationalising the central bank.
According to a source, the government does not have the financial resources to buyout the existing shareholders of the bank. That is because the government has already spent borrowed billions of dollars to fund the ongoing recovery.
USDZAR technical outlook
The USD/ZAR pair has made an important milestone today. After months of trying, the pair has managed to move below the June 10 low of 16.3367. The USDZAR has also managed to move to the lowest level since March 16. It is still below the 50-day and 100-day weighted moving averages. It is also between the 50% and 38.2% Fibonacci retracement level.
Therefore, it seems like bears have prevailed, which means that the South African rand will continue gaining in the near term. On the flip side, a move above the psychological level of 17.00 will invalidate this thesis.
USD/ZAR daily chart