The South African Rand (ZAR) has been appreciating against the US Dollar (USD) since April 2020, with the USDZAR forex rate being driven lower by a belief in a global recovery from the COVID-19 pandemic.
This was after a surge in USDZAR from the start of 2020 from 13.93 up to a peak in early April 2020 to 19.34.
This aggressive US Dollar appreciation and South African Rand weakness was driven by a “flight to quality” into the US Dollar and a move out of the Rand, given fears that the global economy was going to suffer significantly, in turn damaging the South African economic outlook.
Early 2021 recovery efforts for USDZAR have been driven by anticipation of a large US COVID-19 fiscal stimulus from the Democrats, which has seen broad gains for the US Dollar.
- However, USDZAR has faltered twice now in recoveries in 2021, back from 15.66, then the lower 15.38 level.
- This leaves risks for a bearish continuation lower for USDZAR into Q1 2021.
- But watch out for a possible basing if the 14.51 level holds on a next challenge in Q1.
Here we are going to look at the technical analysis you can use when trading a currency pair like USDZAR. You can learn more about technical analysis at FxExplained and also find a trusted broker for trading in South Africa here.
USDZAR technical analysis: A bear bias
The intermediate-term theme for USDZAR is bearish, with trendlines from 2020 still pointing lower and intact.
Whilst below 15.38 the intermediate-term threat is for a lower USDZAR forex rate.
Downside risks: We see an intermediate-term bear trend to aim for 14.51, 13.93 and maybe 13.22.
If 14.51 holds during the next test lower, however, the threat would start to shift higher.
What changes this? Above 15.38 shifts the intermediate-term bear trend straight to an intermediate-term bull trend.
Upside threat: A push above 15.38 would open up a recovery theme to aim USDZAR higher. Targets would then be quickly to 15.66, but with the threat up towards 17.26.