- Summary:
- The USDZAR is little changed today as traders reflect on the second quarter weakness of the South African economy. Airline deal is also being watched
The USDZAR pair is relatively unchanged today as traders reacted to some developments from South Africa and the US. The pair is trading at 17.0455, which is in the same range it has been for the past few days.
South Africa reaches deal on South African Airlines
South African Airlines, as all global airlines, has been affected significantly by the pandemic. The company has packed most of its planes because they are not allowed in most countries. As such, like all airlines, it has been incinerating money. Worse, the company, which employs thousands of people, was in problems before the crisis started.
As we reported a while back, the government was considering the company disappear. It has been under administration for a few months. In a statement today, the company said that it had cleared a major hurdle that is needed to keep it alive. This happened after the National Union of Metalworkers of South Africa and the South African Airways Cabin Crew Association reached a deal on pension.
In the new deal, the cost to the state will be about $129 million. The company will need to find about 56 million rand to cover their pension. This deal is important because the company will meet with its creditors, unions, and other groups to deliberate on its survival. Still, even if it survives, the old challenges will remain.
The USDZAR pair is also reacting to news that the South African economy probably dropped by more than 30% in the second quarter. That is according to the country’s central bank and will be the worst performance since 1990. It declined by 2% in the first three months of the year.
USDZAR technical outlook
The USDZAR pair is trading at 17.0255, which is slightly below the 50-day and 100-day exponential moving averages. The price is also slightly below the 38.2% Fibonacci retracement level. This retracement is drawn by connecting the lowest and highest points this year. Also, the price seems to be moving in a downward channel and is slightly above the psychologically-important level of 17.00. Therefore, the price could continue falling as bears attempt to test the next support at 16.6317.
On the flip side, a move above the 50-day EMA at 17.50 will mean that there are more bulls who will be keen to push the pair higher.
On the flip side, immediate support for Dow Jones index is at 25,096 the low from yesterday. Next support for the Dow Jones will be met at 24,952 the 50-day moving average. A break below 24,952 might open the way for a test of 24,755 the 100-day moving average.
USDZAR forecast
