The South African rand collapse gained steam on Wednesday as the outlook for the country’s economy worsened. The GBP/ZAR exchange rate surged to a high of 23.81, the highest point since 2016. Similarly, the USD/ZAR surged to a high of 18.73, the highest level since 2020. In all, the rand has plunged by over 240% from the lowest level in 2005.
South African rand collapse continues
The GBP/ZAR and USD/ZAR pairs have been in a strong bullish trend in the past few months as the South African economy faces significant challenges. The biggest challenge is on energy, which has seen Eskom announce major rationing.
In a statement, the country’s president has declared the energy situation a major disaster. He has also announced measures to solve the crisis. For example, the company’s acting CEO and Public Enterprises minister traveled to China to seek help from the government.
The trip is also meant to discuss an impasse that has blocked supply of locomotives and spareparts for Transnet, the rail company. Transnet is an important company that transports coal and other resources for the energy sector.
Therefore, the performance of the South African rand is a reflection that investors expect the economic situation will worsen in the coming months.
USD/ZAR technical analysis
Turning to the daily chart, we see that the USD to ZAR exchange rate has been in a strong bullish trend in the past few months. Crucially, the pair managed to move above the key resistance level at 18.72, where it had struggled to move above this year. This is a sign that the bulls have prevailed.
The pair has moved above the 25-day and 50-day exponential moving averages (EMA). The Relative Strength Index (RSI) has continued rising. Therefore, the pair will likely continue soaring as bulls target the key resistance point at 20.
GBP/ZAR price forecast
The GBP/ZAR exchange rate has been in a strong bullish trend in the past few months. It jumped to a high of 23.77 on Wednesday as the South African rand sell-off continued. The pair has jumped above all moving averages and has moved above the important resistance point at 23, the highest point on April 12. Oscillators have also drifted upwards.
Therefore, the pair will likely continue rising as buyers target the next key resistance at 25. The stop-loss of this trade will be at 23.
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