The USD/ZAR exchange rate rose on Monday morning as financial markets opened following the weekend developments in Iran and the Middle East in general. The pair was trading at 16.9, up from the year-to-date low of 15.6.
South African Economy to be Affected as Crude Oil Prices Jump
The USD/ZAR pair reacted to the latest developments in the Middle East, where the crisis continued to escalate on Monday.
This crisis started on Saturday when the United States and Israel launched a major attack that took out Iran’s Supreme Leader and killed hundreds of more.
Iran has closed the Strait of Hormuz, where a substantial amount of crude oil passes through. As a result, Brent and West Texas Intermediate (WTI) continued soaring, moving to nearly $90 a barrel. This rally continued even after the OPEC+ cartel decided to increase the daily supply.
Soaring crude oil prices have a negative impact on the South African economy, which imports all its crude oil. As such, higher crude oil prices for longer will likely affect the economic growth in the near term.
Still, the South African rand remains in a bull market as the USD/ZAR pair dropped by over 20% from the highest point in April last year, helped by the rising gold prices and the stability by the coalition government in the country.
The South African rand has also benefited from the ongoing demand for emerging markets currencies, including the Chinese yuan, Mexican peso, and South Korean won.
Looking ahead, the USD/ZAR pair will react to the upcoming US macro data, including the upcoming US non-farm payrolls (NFP) data, which will come out on Wednesday and Friday.
The Wednesday report will be from ADP and will be in the private sector, while the Friday one will be from the Bureau of Labor Statistics (BLS). Analysts expect that the upcoming reports will show that the labor market weakened in February.
USD/ZAR Technical Analysis
The daily timeframe chart shows that the USD/ZAR exchange rate has been in a strong downward trend since last year when the US dollar sell-off continued. It dropped and formed a small double-bottom pattern at 15.82 in February.
The pair rose on Monday as investors moved to the safety of the US dollar. Still, it remains much lower than the 50-day and 100-day Exponential Moving Averages (EMA). It also remains below the Ichimoku cloud indicator.
Therefore, the most likely USD/ZAR forecast is still bearish, with the next key target being the year-to-date low of 15.6458.