RAND ANALYSIS
- South African rand up 20c against the dollar.
- Riot aftermath anticipated in upcoming economic data.
- Technical analysis could point to fading downside.
ZAR FUNDAMENTAL BACKDROP
RAND BUOYED BY EXTERNAL GLOBAL FACTORS
The rand[1] started the week on the front foot up roughly 1.3% (at the time of writing) against the U.S. dollar[2]. Support sourced from stronger rand linked commodities[3] like iron ore, platinum[4] and gold[5] along with a weaker greenback – dollar index (DXY)[6] down 0.17%.
GET YOUR Q3 RAND FORECAST HERE![7]
U.S. MANUFACTURING PMI’S IN FOCUS LATER TODAY
U.S. manufacturing PMI is due later today (see calendar below) from both ISM[8] and Markit sources. Both are expected to print higher than previous data and any surprise either way could result in significant price fluctuations for the USD/ZAR[9] pair.
From the South African perspective, the ABSA Manufacturing PMI figure for July was 43.5 which is notably less than the prior print of 57.4. Effects from the recent riots and looting in two major provinces is likely a major contributing factor. As a general rule of thumb, when manufacturing PMI data is above 50 the economy is deemed to be expanding and vice versa.
Source: DailyFX
TECHNICAL ANALYSIS
USD/ZAR 4-HOUR CHART
Chart prepared by Warren Venketas[11], IG
USD/ZAR[12] fell below key support at the 61.8% Fibonacci[13] (14.5030) – Fibonacci retracement taken from February 2018 lo to April 2020 high. This follows the shooting star candlestick pattern[14] I mentioned in last week’s analysis[15] which has since unfolded as
