USDZAR
The pound to rand exchange rate was little changed today as traders reflected on the South African stimulus package that was announced on Tuesday, UK manufacturing and services PMI, and an upcoming speech by Ramaphosa.
Markit and the Chartered Institute of Purchasing Suppliers released the manufacturing and services PMI today. The data showed that the country’s manufacturing and services sector had worsened in April.
The services PMI declined to a record low of 12.3, which was significantly lower than the previous 34.5. Analysts polled by Bloomberg were expecting the PMI to have declined to 42. The crucial services PMI dropped to a record low of 12.3 from the previous 34.9. According to Markit, the decline was mostly because businesses were forced to shut down because of the pandemic. While weakness in manufacturing and services was expected, the numbers were bigger than what analysts were expecting.
Investors also focused on an upcoming speech by Cyril Ramaphosa, the country’s president. In the speech, which will be delivered later today, analysts expect the president to lay-out a strategy of reopening the country.
The speech by the president comes two days after the president launched a giant $26 billion stimulus package. As I wrote yesterday, the country will fund the package using borrowings from the IMF and using money allocated in the budget. Still, there are questions about how well the funds will be used due to the country’s high rate of corruption.
Meanwhile, investors are also reacting to a statement by a senior doctor, who warned that the disease would kill more than 45,000 deaths. The doctor, who is a close advisor to Ramaphosa, also said that the country will go through more lockdowns in the next two to three years.
Also, the market reacted to news that more mining companies were set to reduce their investments in the country. Today, De Beers, the diamond miner said that it will mine fewer diamonds this year because of low demand from the US.
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The GBPZAR pair is at an important level on the four-hour chart. The pair is trading a few pips below its all-time high of 23.6570. The pair has formed a strong multi-top pattern at this level. The current resistance is happening mostly because of indecision between bulls and bears about the direction of the trend. Also, the pair is trading above the 100-day and 50-day exponential moving average.
The likely scenario is where the pair breaks past the resistance and continues rising. If this happens, it will likely find another resistance at the psychological level of 24.00.
An alternative scenario is where the pair declines and tests the 50-day EMA. This could happen because the pair has formed a triple top pattern.