The USDZAR pair continued to drop, a day after South Africa reported the lowest daily coronavirus infections since July 8. The pair is down by more than 0.65%, and is trading at 16.5200, which is the lowest it has been since July 8. Similarly, South African stocks are near their March highs. According to Bloomberg, the FTSE/JSE Africa All Share Index is up by 2% today, meaning that it has jumped by 50% from its March lows.
US dollar weakness pushes South African rand higher
The USDZAR pair is falling mostly because of the overall weak US dollar. The US dollar index is down by almost 10 basis points as traders move to other currencies.
This weakness is likely because of the progress being made to develop a coronavirus vaccine. In a statement yesterday, The Lancet said that a vaccine being developed by AstraZeneca has made significant progress in early tests.
This means that a vaccine could be sold in the next few months considering that other firms have made progress on their vaccines. In a statement, Henre Herlsman told Bloomberg that:
“The enormous rally has been fueled by hopes of a vaccine, but primarily by global central banks stepping up, providing almost unbelievable stimulus packages and reassuring markets that they are here to provide liquidity.”
USDZAR technical analysis
Can the USDZAR continue to fall? On the weekly chart, we see that the USDZAR pair has been in a downward trend for the past five weeks straight. In this period, it has moved from a high of 17.5157 to an intraday low of 16.500.
The price is still above the 50-day and 100-day exponential moving averages. It is also slightly above the 38.2% Fibonacci retracement level. At the same time, the Relative Strength Index (RSI) has moved to the lowest level since January. Therefore, the pair is likely to continue falling as bears target the 50% retracement at 15.4410.
On the flip side, a move above 17.50 will invalidate this trend. This price is the highest it has been in June and is also along the 23.6% retracement level.