ZAR: USD Strength, Commodity Weakness Prompts Solid USDZAR Recovery

The recovery in the greenback this afternoon and ongoing pressure on commodities has kept USDZAR (+1%) topside intact, with the pair testing yesterday’s highs at typing. The rand was already the weakest performing currency in the EMEA region at the start of the session after China policymakers failed to satisfy investors with another round of meaningful stimulus.

• However, FirstRand has turned more bullish on South Africa’s economy, and now sees a greater chance of economic growth accelerating to 2% and the rand strengthening to below 16 per dollar next year. It lifted the probability of its bull-case scenario unfolding to 25%, from 20%, while the bear-case probability was reduced to 25%, from 30%, in a note published Monday. On the other hand, Citadel note that the rand is considered overbought close to 17/USD.
• For USDZAR, the pair remains in a clear downtrend with the latest recovery deemed corrective from a technical standpoint. 17.4193, the Jul 27 ‘23 low, has recently been cleared reinforcing the current bearish condition. Sights are on the 17.00 handle next. Initial firm resistance is seen at 17.7285, the 50-day EMA. A clear break of the average would signal a potential reversal.
• Data releases are thin this week with just manufacturing production figures for August on the local slate.