The USDZAR pair is up by more than 0.45% as traders reflect on the new safety standards announced by Cyril Ramaphosa yesterday. South African stocks have also dropped by more than 1.2%, ending the significant rally that has been going on. The South African rand has also dropped against the euro, sterling, and Australian dollar.
South Africa reopening halted
The USDZAR pair ended the rally that has been going on in the past few days. This decline came after Cyril Ramaphosa announced new measures meant to curb the spreading of the coronavirus. It also came a day after the South African central bank decided to slash interest rates.
In an announcement yesterday, Ramaphosa announced that all schools will be closed to prevent the virus from spreading. He announced this a few days after the country banned the sale of alcohol.
All this happened as the number of coronavirus cases has been rising. Official statistics puts the total number of infections at more than 408,000. Deaths have risen to more than 6,093. In the past two days, the new infections have jumped by more than 26,000.
And media reports suggest that the number of deaths are higher than what have been reported. Data from the South African Medical Research Council showed that deaths are more than 17,000.
Therefore, there is some selling pressure on the rand and South African stocks. Indeed, foreigners sold shares worth more than 554 million rand. Indeed, analysts at Rand Merchant Bank expect that the currency will continue falling. They said:
“In all, the rand’s appreciation trend has been seriously damaged, and it will take time to resume.”
In its statement after the rate cut yesterday, Boingotlo Gasealahwe of Bloomberg said:
“While the SARB’s model suggests an end to the current easing cycle, we still expect more cuts this year — but at the slower pace than seen today, as incoming economic data continues to lag the current reality.”
USDZAR technical outlook
The USDZAR pair is trading at 16.7222. On the daily chart below, this price is slightly below the 50-day and 100-day exponential moving averages. It is also above the 50% Fibonacci retracement level. Also, the price is below the descending trend line that is shown below. Therefore, the price is likely to resume falling as current situation of risk aversion ends.
If it does, bears will be attempting to test the important support level at 16.3247. On the flip side, a move above 17.000 will mean that bulls have prevailed. This is an important psychological level that is also along the 50-day and 100-day EMAs.
USDZAR technical forecast