The USDZAR pair is down by more than 1.22% today as traders react to the surging commodity prices. The pair is trading at 16.4600, which is close to June’s low of 16.3433. The weakness of the US dollar has also contributed to the weakness since the US dollar index is down by more than 0.25% today.
Commodity prices push South African rand higher
The likely reason why the USDZAR is down today is the higher commodity prices. These prices matter because South Africa is renowned for its vast mineral resources like gold, copper, and platinum. As I wrote earlier today, the prices of these metals has surged today.
Gold is now trading at its highest level on record while copper price is slightly below $3. The same is true with platinum and palladium prices that are trading at $973 and $2375.
Higher commodity prices are better for the South African economy and the rand because they bring more foreign exchange. Also, they will help to offset the declining sectors like manufacturing and services.
US dollar weakness
The USDZAR pair has also declined mostly because of the overall weakness of the US dollar. The dollar index, which measures the performance of the currency against its key peers has declined by more than 25 basis points.
This decline is mostly because of the rising number of coronavirus cases in the United States and the realisation that the economy will take longer to recover. As it happens, other economies like Europe and Asia are seeing impressive recovery.
USDZAR technical forecast
The USDZAR pair is trading at 16.4600, which is significantly below this year’s high of 19.3397. On the daily chart, the price is below the 50-day and 100-day exponential moving averages and slightly below the 50% Fibonacci retracement level. The price is also below the descending trend line that is shown in yellow. Therefore, the price is likely to continue falling as bulls target the next resistance level of 16.3197.
On the flip side, a move above 17.00 will invalidate this trend. This is an important psychological level that is also along the 50-day and 100-day EMAs.