- Summary:
- The GBP/ZAR pair is attempting to test the YTD high of 23.6588 as the outlook for the South African economy remain dim. Millions of jobs may be lost
The pound to rand pair was little changed today as investors battled about divergent news from the UK and South Africa.
In the UK, the number of coronavirus cases and death continued to rise even as the government announced new measures to extend the lockdown. A bigger headline came from Dominic Raab, who is acting for Boris Johnson.
In an announcement, he said that the country would rethink its relationship with China. This means that several issues could be at play. According to Bloomberg, the government could decide to bar Huawei from implementing the country’s 5G. This will be a sharp reversal from what Boris Johnson said in January when he said that his administration would allow the company to build the network.
Meanwhile, in South Africa, the market received a warning from Investec and McKinsey. Investec, a bank that was recently downgraded by Moody’s, said that the country’s economy could not withstand continued lockdown. In a statement, the company’s CEO, Fani Titi said:
“We don’t have the capacity to absorb the kind of job losses that could result. We would see significant damage to the economy, but also to the social fabric.”
In another report, McKinsey said that the ongoing restrictions risked more than 150 million jobs in Africa. The report came as the number of confirmed infections in South Africa has reached more than 2,605.
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Pound to Rand Outlook
The GBP/ZAR pair has been on an upward trend after it failed to move below the 38.2% Fibonacci retracement level of 22.2185 on Thursday last week. This Fibonacci was drawn by connecting the YTD high of 23.6588 and March 18th low of 19.6435.
On the four-hour chart, the pair has been forming a pattern that resembles a cup and handle pattern. The GBP/ZAR pair is also above the Ichimoku cloud. This means that the pair will remain in a bullish trend until it retests the previous high of 23.6588.