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The USD/ZAR price dropped today after the relatively strong economic numbers from South Africa. The pair has dropped to 14.63, which is the lowest it has been since January 4.
South Africa strong numbers
Business activity in South Africa has started to tick-up, signaling that the worst is probably over for the country’s economy.
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Last week, data by IHS Markit showed that the South African manufacturing PMI rose to 50.8 in January from 50.2 in December. A PMI reading of 50 and above is a sign that an industry is expanding. This figure was the highest ever recorded since December 2016.
Today, data by the government showed that manufacturing production declined by 0.1% in December. That was another improvement from the previous decline of 1.6% and the median estimate of a 0.6% decline.
Earlier on the bureau said that mining production rose by 0.1% in December after contracting by 9.4% in November. Economists were expecting the production to drop again by 8%. Gold production fell by 0.9% after falling by 6.4% in the previous month. This production is happening in sync with higher commodity prices, with platinum trading at its highest level in six years.
The USD/ZAR is also falling because of the performance of the US dollar. The dollar index has slumped after a streak of weak economic numbers from the United States. Yesterday, the statistics agency published disappointing inflation numbers. And on Friday, the country released weak jobs data.
Therefore, analysts believe that the Fed will be slow to raise interest rates while the government will unleash another stimulus. Increased supply of a currency tends to lower its value.
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USD/ZAR technical outlook
On the daily chart, we see that the USD/ZAR price has been in a sharp downtrend after it reached a high of 15.65 in January. The price has moved below the 25-day exponential moving average. It is also along the lower line of the Bollinger Bands. Therefore, the path of least resistance is lower as bears target the next key support at 14.50, which is the lowest level this year.
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