Bearish View
Set a sell-stop at 14.30 and a take profit at 14.00 (61.8% retracement).
Add a stop-loss at 14.62 (23.6% retracement.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 14.410 and a take-profit 14.70.
Add a stop-loss at 14.200.
The USD/ZAR price is attempting to rebound after it dropped to the lowest level in a month on Wednesday. The pair is trading at 14.40, which is still about 4% below the highest level in July.
South African Rand Rally Eases
The South African rand has had a difficult time in the past few weeks. Between the beginning of June and July 26, the USD/ZAR pair jumped by almost 12%. This price action was mostly because of the protests that emerged after a court ordered former President Jacob Zuma to report to prison. The protests led to more than 300 deaths and destruction worth millions of dollars.
The impact of these protests was partly revealed this week by Markit and Standard Bank. On Monday, data by Markit revealed that the country’s Manufacturing PMI increased from 57.4 in June to 43.5 in June. This was the lowest level since August 2019. This means that the sector did worse in July than how it performed during the height of the coronavirus pandemic. It was also the first time it moved below 50 since June last year.
Further data by Standard Bank showed that the General PMI declined from 51.1 to 46.1. Therefore, the USD/ZAR pair has declined in the past week because investors expect that the worst has already happened and that the country will resume the growth path.
Further, the pair has fallen because of the potential for inflation. Data published last month showed that inflation declined in June. Therefore, there is a possibility that these prices rose in July as the protests led to massive supply shortages and as the rand weakened. The next key catalyst for the USD/ZAR will be the latest US jobs numbers.
USD/ZAR Technical Analysis
The three-hour chart shows that the USD/ZAR made a strong downward trend since June 26. As it dropped, the pair moved below the ascending trendline that connects the lowest levels since June 8. The pair also moved belpw the 23.6% and 38.2% Fibonacci retracement. The current rebound is happening after it tested the 50% retracement at 14.204. The price is also approaching the upper side of the Bollinger Bands. Therefore, the pair will likely resume the downward trend, with the next level to watch being the 61.8% retracement at 14.00.
