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South African Rand Dollar Forecast: USD/ZAR Conflicted Ahead of Major Risk Events

USD/ZAR Price Outlook:

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Major Risk Events Loom on USD/ZAR

Last week, an increase in risk sentiment for emerging market currencies, resulted in the Rand strengthening against the greenback as it managed to break below the key psychological level of 16.3. However, an array of fundamental events, forecasted to commence this week, will likely influence the short-term trajectory of USD/ZAR, driving price action in either direction.

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With the US presidential elections scheduled to take place next Tuesday, November 3rd 2020, a growing number of Covid-19 related cases, combined with pressure for the approval of a stimulus deal, continue to loom on the US Dollar and bring the expected Q3 GDP data report into the spotlight. This report, expected to be released on October 29th, at 12:30 GMT, will not only be the last high impact data event before the elections, but it will also provide further confirmation on the progression of the economic recovery, an important factor to consider before voters take to the polls.

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Meanwhile, in South Africa, the release of the Q3 Unemployment data and the Medium-Term budget speech are expected to take place this week, likely setting the tone ahead of next month’s rating review by credit rating agency Standard & Poor’s (S&P).

South African Rand Dollar Forecast: USD/ZAR Conflicted Ahead of Major Risk Events

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USD/ZAR Technical Analysis

Taking technical analysis into account, the weekly chart below highlights how the Fibonacci Retracement levels (from Dec 2019 low to April 2020 high) have provided support and resistance for the pair, holding both bulls and bears at bay. However, after reaching the historical high in April, price action has favored the bears, with the trendline confirming the presence of a downward trend.

USD/ZAR Weekly Chart

USD/ZAR Weekly Chart

Chart prepared by Tammy Da Costa, IG

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If we refer to the daily chart, the stochastic is currently below 20, a possible indication that USD/ZAR may be oversold. A cross of the stochastic above 20, may provide a potential signal that the trend may reverse to the upside.

USD/ZAR Daily Chart

USD/ZAR Daily Chart

Chart prepared by Tammy Da Costa, IG

USD/ZAR Strategy Ahead

As long as price action remains below the psychological level of 16.3, this level will continue to hold as resistance, with a break above bringing 16.5 and 16.65 as the next possible resistance points.

On the other hand, a break below may push price action towards the 61.8% Fibonacci retracement level at 16.00, the next level of support.

— Written by Tammy Da Costa, Market Writer for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707