USD/ZAR: What next for the resilient South African rand?

The USD/ZAR price downward momentum has continued this week even after South Africa paused a major vaccination campaign. The pair is trading at 14.8155, which is 5.6% below the January 21 high of 15.66.

USD/ZAR price action

South Africa halts AstraZeneca vaccine

In a statement yesterday, the South African government suspended the use of the coronavirus vaccine developed by AstraZeneca and Oxford University. This is after the government concluded a trial of about 2,000 people. 

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The study found the vaccine only about 25% effective in preventing the vaccine, meaning it would not meet international guidelines. As a result, the country will shift its resources to other vaccines.

The bad news came at a time when the number of daily infections in the country has continued to drop. Yesterday, the government confirmed more than 2,435 new cases, lower than the 7-day moving average of 3,195. This is one reason why the USD/ZAR has been in a downtrend recently.

Meanwhile, the weaker US dollar has also contributed to the recent performance of the USD/ZAR price. The greenback has declined by about 1% in the past three days after the relatively weak US employment numbers.

The worsening US economy has put more pressure on the Federal Reserve to do more. Also, the Federal government is considering more than $1.9 trillion in stimulus. All these have contributed to the devaluation of the dollar.

Meanwhile, the relatively hawkish SARB has pushed the South African rand higher. In its most recent decision, the bank hinted that it will push rates higher faster than earlier expected.

USD/ZAR technical outlook

USD/ZAR technical chart

On the four-hour chart, we see that the USD/ZAR price formed a triple-top pattern at 15.37 in January. Since then, the pair has declined by more than 3.6% and is approaching the important support at 14.76. 

The downtrend is being supported by the 25-day and 15-day exponential moving averages. It is also below the second support of the Andrews pitchfork and the Ichimoku cloud. Therefore, in the near term, the USD/ZAR pair will continue falling as bears target the support at 14.76. A further drop below this support will see it retest the YTD low at 14.50.

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