USD/ZAR in Oversold Territory After Hitting Lowest Level Since 2019

Summary:

USD/ZAR is in the oversold territory after declining to its lowest level since January 2019. South African PPI is at its highest since November 2018.

USD/ZAR is at a 28-month low at 13.70 as a reaction to South Africa’s PPI numbers. According to Statistics South Africa Head Office, the country’s producer prices rose by 6.7% in April on a year-on-year basis. While the figure missed the estimated 6.8%, it is the highest level since November 2018. In the previous month, the PPI index was at 5.2%. Notably, the data has been rising consistently since May 2020. On a month-on-month basis, PPI rose by 0.7% compared to 1.3% in March.

USD/ZAR will also be reacting to the US GDP preliminary data. Economists expect a reading of 6.5% for Q1’21, which is a point higher than the prior 6.4%. The estimate is founded on the stimulus package that largely impacted the country’s economic conditions in the first quarter.

USDZAR Technical Outlook

USD/ZAR is trading lower by 0.40% at 13.70. That is its lowest level since January 2019. Since the beginning of the month, the currency pair has dropped by 5.87%. On a two-hour chart, it is trading below the 25 and 50-day exponential moving averages. With an RSI of 25, it is in the oversold territory.

I expect USD/ZAR to rise to around 13.80, which is along the 25-day EMA, before declining further. The bears will be targeting the lower level of 13.11, which it last reached on 28^th January 2019. This thesis will be invalidated by a move above 13.80.