ZAR: Rand Slips as China Producer Price Deflation Accelerates

The rand has been unable to benefit from the rally in equities and broad-based stability across commodity markets, with USD/ZAR around 0.4% in the green today and 1.7% higher compared to Friday’s post-NFP lows. Instead, renewed deflationary concerns in China and a recovery in the USD are likely weighing on the currency, which trails most of its EMEA peers so far this week.

• Data overnight showed annual producer price inflation in China decelerated to -1.8% in August from -1.4% in July, pointing to a weaker domestic demand backdrop after more than a year of deflation. China’s consumer price index rose 0.6% on a year-on-year basis in August, reaching a six-month high but below expectations of a larger 0.7% rise.
• Despite today’s gains, initial firm resistance for USD/ZAR lies some way off at 18.07, the 50-day EMA. Technical conditions remain bearish given the price sequence of lower-lows and lower-highs, paving the way for an extension towards 17.5713, the Jul 28 ‘23 low, and 17.4193, the Jul 27 ‘23 low and the next key support.