BRICS currencies movement for the week – 5 June 2020

What a week it has been for the Rand (ZAR) – another 4% improvement against the USD. Movement was in line with most BRIC currencies and mainly due to USD weakness.

BRICS currency/USD movements for this week:

Brazil +7.6%
Russia +2.1%
India +0.1%
China +0.8%
South Africa +4.0%

Euro /USD +1.7%

Technically, this week’s break and close of the parallel channel (at R16.95) could be very bullish for the ZAR over the shorter-term. We also saw the 21-day Moving Averages (EMA) break below the 50-day EMA which confirm the short-term bullish trend. ZAR is now trading below all three the 8-, 21- and 50day EMA’s with the 200-day EMA now acting as next support level at R16.23. This makes the trend definitely look a lot healthier.

The 14-day RSI however now finds itself in EXTREME OVERSOLD (overbought from a ZAR perspective) environment, which could see some profit taking from short-term traders soon. Should we see some profit taking, with the ZAR weakens to above R16.95 (moving back into the parallel channel), could see further weakness with resistance being tested at the 8-day EMA at R17.16. I would personally then wait and see if R17.30 hold, with a possible breach most probably only seeking resistance at R17.60 again.

Should we however stay below the R16.95 levels and possibly break R16.55, I firmly believe we will be testing the R16.23, with a break and close below this level, most probably bringing my medium-term target of R15.50, back into play. Even with the Rand being overbought (according to it’s RSI), I believe the trend could continue this week with possible targets of R16.55 (1st) and R16.23 (2nd).