Rand Funded by Loadshedding Reprieve

RAND ANALYSIS & TALKING POINTS

• ESKOM optimism gives rand a boost!
• US ISM non-manufacturing PMI & SA GDP to drive volatility short-term.
• R19.00/$ looming?

USD/ZAR FUNDAMENTAL BACKDROP

The South African rand has entered the trading week on the front foot after Chinese Caixin PMI readings (composite and services) pushed higher generating some support for the ZAR. That being said, South African PMI numbers (refer to economic calendar below) came in at the lowest levels since July 2021 outlining a slowing local economy. Fortunately for the rand, increased generating capacity at ESKOM and fewer reported breakdowns have improved sentiment short-term. In addition, part of the rand strength is likely due to some profit taking as the pair has been in overbought territory for some time at extreme levels.

A highly anticipated release will come via tomorrow’s South African GDP report that could show the economy is in a technical recessions if the QoQ figure comes in below 0% after the 2022 Q4 statistic = -1.3%. If this is the case, the rand is likely to give back much of its recent gains.

From a US perspective, the inability of the recent US Non-Farm Payroll (NFP) report to sway market expectations around the Fed’s upcoming interest rate decision has increased the attractiveness of the carry trade between the rand and US dollar respectively. Later today, the US ISM services PMI will be in focus and is anticipated higher and could prop up the greenback considering the US is primarily a services driven economy.

USD/ZAR ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

USD/ZAR DAILY CHART

Chart prepared by Warren Venketas, IG

Daily USD/ZAR price action is trading at a key inflection point at present testing the 19.3453 support handle, recently breaking below the short-term trendline support (dashed black line). A confirmation close below this 19.3453 level could spark a move towards the 19.0000 psychological zone – likely stemming from a ISM miss and or SA GDP avoiding a technical recession.

Resistance levels:

Support levels:

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