USD/ZAR flirting with daily highs near 14.25 ahead of US docket

• USD/ZAR recovers from yesterday’s drop, tests 14.24.
• The 55-day SMA at 14.32 caps the weekly upside so far.
• South Africa jobless rate ticked higher to 29.0% in Q2.

The Rand has started the week on a positive note, dragging USD/ZAR to the 14.13 region where some decent support turned up.

USD/ZAR focused on US data, FOMC

ZAR lost some upside momentum today after the Unemployment Rate for the second quarter rose to 29.0% from 27.6%, or to 6.7 million people. Earlier on Monday, Private Sector Credit expanded 6.91% during June while M3 Money Supply rose at an annualized 8.99% in the same period.

The Rand has given away gains recorded during the first half of the month following expectations of a looser monetary policy by the Fed and its positive impact on the EM FX universe.

However, a rate cut by the SARB followed by renewed views of an insurance rate cut by the Fed tomorrow have undermined extra strength in the currency, which met strong resistance around the 200-week SMA above 13.80 for the time being.

Later in the day, the US docket will be in centre stage, with June PCE, Personal Income/Spending, Pending Home Sales, the S&P/Case-Shiller Index and the Conference Board’s Consumer Confidence gauge.

What to look for around ZAR

The Rand met strong resistance in the 13.80 region vs. the greenback soon after the SARB reduced its key rate to 6.50% at its July meeting disappointing investors’ expectations of a larger move on rates. The central bank justified its decision in response to projections of lower inflation and GDP growth in the next periods. The generalized view that potential Fed easing could spark fresh inflows into the EM FX universe could not apply for ZAR, as political corruption within the ruling ANC party carries the potential to undermine President Ramaphosa’s position and ability to push for vital structural/economic reforms in the country.

USD/ZAR levels to consider

As of writing spot is up 0.41% at 14.2163 and faces the next support at 14.1375 (low Jul.30) seconded by 14.0252 (21-day SMA) and then 13.8338 (200-week SMA). On the flip side, a break above 14.3177 (high Jul.29) would aim for14.3272 (55-day SMA) and finally 14.5851 (high May 3).