- USD/ZAR witnessed some selling for the second straight session on Friday.
- The risk-on mood, sustained USD selling both contributed to the weakness.
- The downside seems limited as the focus shifts to the key US jobs report.
The USD/ZAR pair edged lower for the second straight session on Friday, albeit held well within a one-week-old trading range.
The US dollar remained on the defensive amid expectations that the Fed might be forced to push interest rates below zero. This comes on the back of a further improvement in the global risk sentiment and the latest optimism over the re-opening of economies in some parts of the world.
The risk-on mood got an additional boost from reports overnight that top trade negotiators from China and the US had held a phone call and agreed to strengthen economic and public health cooperation, which further undermined the greenback’s safe-haven demand
Sustained USD weakness exerted some pressure on the pair for the fourth session in the previous five. However, signs of weakness in the domestic economy, as indicated by a plunge in the PM to all-time lows, held investors from placing aggressive bearish bets.
Investors also seemed unconvinced by the prospects of a V-shaped recovery in emerging markets, which capped any meaningful gains for the South-African Rand. This makes it prudent to wait for some strong follow-through selling before confirming that the pair might have topped out.
Moving ahead, market participants now look forward to the release of the closely watched US monthly employment details. The NFP report will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities on the last day of the week.
Technical levels to watch
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