Danske Bank forecasts USD/ZAR at 15.00

The South African Reserve Bank (SARB) left its interest rate unchanged. That decision underpinned the rand and allowed it to close green yesterday. The enormous government support measures in combination with optimistic vaccine news encouraged investors to stream their capital to emerging markets currencies such as the rand. Nevertheless, the current cautious market sentiment has limited the ZAR’s potential to rise. The fresh virus outbreak and related lockdowns, curfews, and social distancing restrictions toned the risk-on impetus down.

Forecasts

Indeed, there are downbeat risks for the African rand in the short term, but many analysts forecast the steady rebound of economic activity in 2021(which is so close already). Therefore, stocks and riskier currencies such as the rand will get a boost.

If we look at the USD/ZAR chart, we’ll notice that the rand has managed to regain most of its losses already. As Danske Bank properly mentioned, “we view most, if not all, of the fall in USD/ZAR as due to global tailwinds, not domestic”. In other words, the only risk-on sentiment would be enough to underpin the rand and drive USD/ZAR even lower. Danske Bank’s forecast is 15.0000 for the coming months. "We could see more emerging market strength in coming months as the reopening continues”. In addition, many credible banks such as JPMorgan and Goldman Sachs predict a soon fall of the USD, which would be beneficial for the ZAR.

Technical tips

After the gradual falling, USD/ZAR formed the symmetrical triangle, so the pair may go anywhere now. If it breaks the upper trend line at yesterday’s high of 15.5700, the way to the next resistance of 15.6500 will be clear. In the opposite scenario, the move above the lower trend line of 15.3180 will drive the pair lower to November’s low of 15.2000.

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Kseniya Medik