USDZAR: What Next for the South African Rand?

Summary:

The USDZAR pair is in a consolidation zone as investors ignore the strong unemployment data from South Africa. Here are the key levels to watch

The USDZAR pair is little changed today as traders react to the relatively strong unemployment data from South Africa. The pair is trading at 17.08, which is in the same range it was yesterday.

The South African rand is reacting to the relatively better-than-expected jobs numbers from South Africa. According to the Bureau of Statistics (BoS), the unemployment rate fell to 23.30% in the second quarter. That was better than the previous 30.10% and the 29.70% that analysts polled by Reuters were expecting. It is also the lowest rate in decades.

In total, the country reported more than 4.3 million people of working age unemployed vs the previous 7.1 million.

The strong jobless numbers come at a time when South Africa has managed to reduce the number of coronavirus infections. According to the Ministry of Health, the country recorded just 903 new cases yesterday. While this number is still high, it is the lowest it has been since May. It is also significantly lower than the peak of more than 9,000 in July.

Still, the South African economy is not out of the woods yet. Public debt has continued to rise and most companies in the country are reporting significant challenges. Also, there are doubts about whether the current job additions are sustainable.

USDZAR technical outlook

The daily chart shows that the USDZAR has found strong resistance at the current level of ~17.00. This price is along the downward trend that connects the highest levels in April, August, and in September. The price is also along the upper side of the Donchian channel. Also, it is forming a descending triangle pattern with the support at the ~16.50 range.

Therefore, there are two scenarios for the South African rand. First, a strong volume-supported move above the current resistance will see the pair continue to rise with the next stop at 17.75, which is the highest point in August. The other scenario is where the price fails to move above this trendline and declines. If this happens, it will likely continue falling as bears aim for the support at ~16.50.