The USD/ZAR dropped to the lowest level since February 2019 as the spectacular rally of the South African rand continued. It dropped to 13.660, which was 30% below the highest point in 2020. The GBP/ZAR and EUR/ZAR also fell to the lowest level since February 2020.
South African rand rally continues
The South African rand has emerged as one of the best performing emerging market currencies helped by the improving political and economic conditions.
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Recent data showed that the country’s manufacturing and services sectors have improved. Similarly, mining production and retail sales have bounced back.
In a report published on Thursday, the South African statistics agency said that the producer price index (PPI) rose by 6.7% in April after rising by 5.2% in the previous month. This was a smaller increase than the median estimate of 6.8%. It was also the highest it has been since November 2018. In addition, the PPI has been rising for the past 11 consecutive months.
On a month-on-month basis, the PPI rose by 0.7% after rising by 1.3% in March. It attributed this performance to the recent jump in commodity prices.
The South African PPI data came a week after the South African Reserve Bank (SARB) delivered its interest rate decision. As expected, the central bank left interest rates unchanged at 3.5% for the fifth consecutive month. The bank also sounded hawkish, with the Central Bank governor saying that it will remain accommodative in the near term.
Looking ahead, the USD/ZAR price will react to the latest US GDP data that will come out on Thursday. The data is expected to show that the economy expanded by 6.2% in the first quarter because of the large stimulus package. The government will also publish the latest initial jobless claims numbers.
USD/ZAR technical forecast
The daily chart shows that the USD/ZAR pair declined to the lowest level since 2019 on Thursday. It also dropped below the important support level at 13.94, which was the lowest level in January 2020. The pair also moved below the 25-day and 15-day exponential moving averages while the Relative Strength Index (RSI) moved to the oversold level of 30. The pair’s path of least resistance is lower, with the next key level to watch being 13.00.