USD/ZAR regains downside traction post-upbeat GDP
- USD/ZAR dropped to new multi-day lows near 15.00.
- South Africa GDP surprised to the upside in Q2.
- Domestic manufacturing PMI dropped to 45.7 in August.
The South African Rand is extending the upbeat momentum today and forces USD/ZAR to drop to the 15.00 neighbourhood, or fresh two-week lows.
USD/ZAR comes down after GDP figures
The pair has resumed the downside on Tuesday, reversing Monday’s gains and refocusing instead on the key support in the 15.00 region.
ZAR regained traction after GDP figures showed the economy sharply reversed the contraction recorded in Q1 and expanded at an annualized 3.1% during the April-June period, surpassing initial estimates.
On the not-so-bright side, the manufacturing PMI slipped into the contraction territory in August, falling to 45.7 from 52.1.
Later in the week, the PMI gauged by the SA Standard Bank is due tomorrow seconded by Net FX Reserves figures on Friday.
What to look for around ZAR
The Rand met strong resistance in the 13.80 region vs. the greenback soon after the SARB reduced its key rate to 6.50% at its July meeting, disappointing investors’ expectations of a larger move on rates. Today’s auspicious GDP figures, however, gave much needed oxygen to the currency following recent 2019 highs. The generalized view that potential Fed easing could spark fresh inflows into the EM FX universe could not apply for ZAR, as political corruption within the ruling ANC party carries the potential to undermine President Ramaphosa’s position and ability to push for vital structural/economic reforms in the country.
USD/ZAR levels to consider
As of writing spot is losing 0.67% at 15.1445 and faces the next support at 15.1191 (low Sep.3) seconded by 15.1331 (low Aug.22) and then 14.5707 (55-day SMA). On the flip side, a break above 15.4831 (high Aug.29) would open the door to 15.4979 (2019 high Aug.19) and finally 15.4990 (high Aug.13 2018).