Rand disappears while SARB keeps rates unchanged

RANDOM ANALYSIS

  • local perspective remains controversial despite the repression of the uprising.
  • South African Reserve Bank (SARB) remains accommodative.
  • USD / ZAR is poised for a bearish decline.

FUNDAMENTAL BACKGROUND ZAR

rand withdrew part of its lost gains against the US dollar in line with the weakness of the dollar in most Emerging Market Currencies (EM). ZAR’s appreciation is positive news amid local unrest that has since subsided. Unfortunately for South Africans, the political consequence of civil unrest persists as the African National Congress (ANC) is divided on how to proceed. Every decision from now on will be crucial for the future of the economy and for the confidence of local and foreign investors.

GET YOUR Q3 RANDOM PREDICTION HERE!

Local raw material exports (gold, platinum and iron ore) were also weaker this week, further confirming the strength of the rand.

SARB KEEPS RATES AT 3.5%

SARB did not change interest rates, while the reserve bank’s approach outlined by Finance Minister Lesetja Kganyago was almost a mirror image of the previous rate announcement. decision was unanimous and may have been prompted by protests in recent weeks in KwaZulu-Natal and Gauteng provinces, respectively. Some key points mentioned:

  • Higher cases of COVID-19 are expected.
  • Reduction in closely related sectors such as tourism.
  • recent turmoil could hamper GDP growth for the rest of 2021.
  • Short-term headline inflation has been revised upward.
  • trajectory of interest rates in the future implies an increase of 25 basis points in the fourth quarter of 2021 and this quarterly trend continues until the end of 2022.
  • SARB remains dependent on the data and the risk of events that may alter the aforementioned rate path.

ATTENTION TO US MANUFACTURING SMEs AT THE END OF THE WEEK

Volatility on USD crosses, tomorrow’s pre-PMI announcement should be anticipated (see schedule below). Any unexpected launch figure is likely to trigger significant price fluctuation, so ensuring sound risk management technique is key.

ECONOMIC CALENDAR USD / ZAR

Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

USD / ZAR WEEKLY CHART

Picture made by Warren Venketas, YO G

long-term USD / ZAR weekly chart above shows the recent break above trend line resistance (black) as expected in my USD / ZAR Forecast for the third quarter last month. Since then, the 14.5000 psychological zone provided a central point for recent consolidation and price action. However, this bullish rally may be slowing down, which may see moves back or below the 14.5000 take over.

USD / ZAR 4 HOURS GRAPH

Picture made by Warren Venketas, YO G

4 hour chart paints a bearish picture as potential for the current to complete the training looms flag holder. A bear flag is bearish continuation pattern that is usually preceded by a strong downtrend. A break below the flag / channel support (yellow) could trigger bearish target levels as described above: 14.5030, 14.3365.

Similarly, a push above the resistance of the flag / channel (yellow) will invalidate the bearish flag and could see further upward movement of price towards price. 14.7375 and 15.0000 respectively.

– Written by Warren Venketas for DailyFX.com

Contact and follow Warren on: @Venketas

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