The USD/ZAR pair rose for two consecutive days as the US dollar rebounded after the latest US jobs report. It rose to 17, up slightly from last week’s low of 16.68. The South African rand has retreated by 8.6% from its highest point this year.
South Africa Economy on Edge as Stocks Drop and Inflation Jumps
The USD/ZAR pair has jumped in the past few weeks, moving from a low of 15.6 in February to the current 17. This rally coincided with the start of the ongoing Iran war that has pushed energy prices higher, with top benchmarks like Brent and the West Texas Intermediate (WTI) rising to above $110.
The two have jumped by over 100% from the lowest level this year, leading to higher energy costs in South Africa. As a result, there is a likelihood that the country’s economy will experience a jump in inflation in the coming weeks.
The USD/ZAR pair has also jumped because of the ongoing stock market plunge that has pushed most companies downwards. For example, the JSE All Share Index had its worst month in years, with mining companies being the top laggards.
This retreat happened as gold and top metals like platinum slumped. As a result, many foreign investors have started selling their South African stocks, leading to weaker demand for the rand.
On the other hand, demand for the US dollar has jumped in the past few weeks because it is widely seen as a safe-haven asset. The demand rose on Friday after the US published strong non-farm payrolls data, which showed that the economy created 178k jobs and the unemployment rate fell to 4.3%’
USD/ZAR Technical Analysis
The daily timeframe chart shows that the USD/ZAR pair has rebounded from a low of 15.6 in January to 17 today. As a result, it has moved slightly above the middle line of the Bollinger Bands tool. It has also risen above the 50-day Exponential Moving Average (EMA).
On the flip side, the pair has formed a rising wedge pattern, which is made up of two ascending and converging trendlines. The pair has already moved below the lower side of the wedge and is attempting to retest it.
Therefore, the pair will likely resume the downward trend, with the initial target being last week's low of 16.65. A drop below that level will point to more downside, potentially to the psychological level at 16.