ZAR PRICE ACTION TALKING POINTS:
- South African Rand continues to show strength with several macroeconomic tail winds in support
- USD/ZAR[1] approaches 200-day Moving Average (MA) after breaking below 17.0000
- Possible bullish cross looming for GBP[2]/ZAR
- EUR[3]/ZAR trading at monthly lows
- South African inflationary data around the corner
- Global markets to keep a close eye on upcoming Jackson Hole Symposium
SUPPORTIVE MARKET ENVIRONMENT FOR EMERGING MARKET CURRENCIES
Recent resilience show by the South African Rand (ZAR) has continued spurred on by the passing of a COVID-19 drug by the US regulators. Risk seeking investors cheered as Emerging Market (EM) currencies[4] saw large favorable swings.
With the South African government recently easing lockdown restrictions despite ballooning virus figures, the economy needed assistance sooner rather than later. Being a developing nation, South Africa may not rebound to pre-pandemic levels as easily as more developed nations around the world. Although stimulus measures are in place, corruption and political instability still plagues the lives of ordinary citizens.
The strong Rand has not done exporters any favors which is not ideal for economic growth. With the manufacturing sector operating at depressed levels, the support of local industries has been hit hard.
Moving deeper into Q3, ZAR price action seems to be the result of by external global factors – primarily the US Dollar[5] puppeteer. The US is under the spotlight on various fronts such as US elections, Jackson Hole Symposium and US-China tensions. These events can have widespread ramifications for global currencies. ZAR bulls are enjoying the current risk on sentiment but for how long?
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