USDZAR breaks past the 18 rand mark after strong USD economic data

The latest economic data for the USA has been positive as the dreaded inflation that has been the nightmare of USA economists is showing signs of slowing down. This positive news along with the negative political and economic situation that South Africa finds itself in under the current energy crisis has meant the rand has taken quite the slump. Now that we have reached these new historic highs what should South African traders expect to encounter going into the future？

The current economic and political situation in South Africa is not so inviting to foreign investors. The current energy crisis in South Africa regularly hampers economic productivity as daily there are energy-reliant industries that suffer through the load shedding. To add salt to injury, the energy company that is pushing the whole country is partly running on diesel backup generators that are constantly racking up huge debt for the government and the country. The issue is out of hand to the point that the president himself has declared a state of emergency. There are several projects underway to bolster the power supply however one can expect that there will be some time taken to reach full energy capacity again (thats if it will be reached at all).

On the USA side, however, we recently got news of a reduced inflation rate. This is good news as there can be more credit made available by the FED and more economic activity can be encouraged. In contrast to the stark recession fears, this good news is well received and has caused several shifts in the markets.

The negative outlook of the South African economy when contrasted with the positive outlook of thee USA economy shifted the forces of supply and demand in the favor of the USD and hence we are now seeing the USDZAR climb to historic levels .

What should we look for as traders ？

The next FOMC meeting minutes on the 22 of February is set to bring about market volatility for the USD currency and hence the USDZAR currency pair is also bound to show massive movements. Make sure to have your important resistance and support areas marked out during that announcement. A day before that we will also be receiving key economic data from the South African side (employment figures). If that data is positive we can then assume the trend will halt for a while, otherwise if it is negative we should expect this trend to continue.