SARB leaves rates unchanged amid new variant of coronavirus USDZAR GBPZAR
SARB leaves rates unchanged amid new variant of coronavirus: USD/ZAR, GBP/ZAR
Little is discussed regarding the effect of the coronavirus (and its variant) on the South African economy. Earlier today, the South African Reserve Bank (SARB) left rates unchanged at 3.5%, a record low. The central bank had cut interest rates by 300 bps over the last year, however the decision makers determined that risks to growth and inflation were balanced, despite South Africa having 1.3 million coronavirus cases of its own, including a new variant strain which is said to be 50% more infectious. Additionally, the richest country in Africa has yet to roll out vaccines, saying that they will begin vaccinating people in the first half of 2021! Do Rand traders agree with the SARB?
USD/ZAR had put in an all time high on April 6th, 2020 at 19.3390. Since then, the pair has been moving steadily lower and put in a recent low near 14.5050 on January 4th, which is near pre-pandemic levels. USD/ZAR bounced to a downward sloping trendline from the April highs near 15.6610 on January 11th and began moving lower again.
Source: Tradingview, City Index
On a 60-minute timeframe, the pair USD/ZAR has been moving in a downward sloping channel and retraced to the 78.6% Fibonacci level from the lows of January 4th to the highs of January 11th, near 14.7500. This level confluences with horizontal support and short-term trendline support. After the SARB announcement, the pair bounced. First horizontal resistance above is at 15.0525. If price can move above there, sellers will be sitting at the top trendline of the downward sloping channel near 15.2000. Support is back at today’s lows near 14.7500, then the January 4th lows near 14.5000.
Source: Tradingview, City Index
GBP/ZAR has followed a similar path to USD/ZAR, however, with more volatility! After peaking in April near 23.7118, the pair moved lower and had a large bounce in July. From there, the pair moved lower towards support at 19.5514, forming a descending wedge. GBP/ZAR put in shooting star reversal candle on December 21st at the support level, forming a false breakdown below the bottom trendline of the wedge. Price then reversed and broke out higher above the descending wedge (as one would expect) and is currently forming a flag pattern near 20.5250.
Source: Tradingview, City Index
On a 240-minute timeframe, price pulled back to the 50% retracement from the January 11th highs to today’s lows near 20.2900 and bounced. GBP/ZAR is trading near current short-term resistance near 20.5768. Just above there is the top downward sloping trendline from the flag near 20.6575. On a breakout of the flag pattern the target is near 20.6550, however the pair must first get past the January 11th highs resistance at 21.1045. Today’s low acts as first support near 20.3860. Below there, bulls will be waiting at the bottom trendline of the flag and horizontal support near 20.1318.
Source: Tradingview, City Index
Although South Africa is going through grave problems with the coronavirus and its own variant, the SARB feels that risks are balanced current interest rates at 3.50% are appropriate. If South Africa continues to have trouble with the variant, perhaps more accommodation may be necessary. Watch for headlines related to the South African variant the ability for the country to obtain the vaccine.
Learn more about forex trading opportunities.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024