- Summary:
- The USDZAR rally run out of gas after weak PPI data from South Africa. The pair is also waiting patiently to US jobless claims and Q1 GDP data
The USDZAR pair rose slightly today as the South African rand rally hit a breather. The pair is trading at 17.4471, which is slightly above the yesterday’s low of 17.2876.
South Africa PPI heads lower
The South African rand declined slightly today as investors reacted to the weak Producer Price Index (PPI) data. According to the South African Bureau of Statistics (SABS), producer prices rose by just 0.1% in March. That was lower than the February increase of 0.3%.
It was also the lowest it has been since the 0.3% decline in 2019. The PPI rose by 3.3% on an annualised basis. Also, these numbers don’t include April, when the country started the Level 5 lockdown.
These numbers came at a time when the South African economy is ailing. According to the bureau, more than 8.1% of South Africans have lost their jobs or closed their businesses due to the virus.
At the same time, the country is facing the challenge of reopening at a time when the virus has not been eradicated. In fact, South Africa is reporting hundreds of new infections every day. Unlike in other western countries, a substantial amount of people in South Africa live in informal settlements, where the disease is easy to spread.
According to Bloomberg, South African mines are also facing challenges in their quest to reopen. These companies, which employ thousands of South Africans, will need to do thousands of tests every day, which could take more than 4 hours every day.
USDZAR awaits for key US data
On the other side of the equation, the USDZAR pair is waiting for important data from the United States. The Bureau of Statistics will release the second reading of GDP data and the durable goods orders. Other important numbers that will be released today are initial jobless claims and pending home sales numbers.
While these numbers are expected to be weak, I don’t think they will move the dollar significantly because investors are now focusing on the future or leading data.
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USD/ZAR technical outlook
On the daily chart, the USDZAR pair found some significant support at the 38.2% retracement level of 17.2876. The price is now below the 100-day exponential moving averages data and slightly above the 50-day EMA. Also, the price is in an overall bearish trend. Therefore, I expect it to continue falling since bears seem to be in control. But they must now defend the 38.2% Fibonacci level. If they do, they will next target the 50% retracement at 16.6248.
On the flip side, a move above 18.000 will invalidate this trend. This price is slightly above the 100-day EMA and slightly below the 23.6% retracement level.