Home Forex Market Analysis USDZAR: Rand Takes Advantage of Improved Mining Production

USDZAR: Rand Takes Advantage of Improved Mining Production

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USDZAR: Rand Takes Advantage of Improved Mining Production
  • Mining production in South Africa surged 0.8% in February 2021 YoY.
  • South Africa has paused J&J vaccination to assess blood clots the US claims. 
  • The US faces an inflation increase with March CPI at +0.5%.

The USD/ZAR pair opened lower at -0.13% on April 13, 2021, from the previous day. The currency traded at 14.5043 after a record release indicated that South African mining production had surged 0.8% from a previous decline of -8.4%. The production had beaten estimates at -1.9%. Gold production stood at -8.7% from a prior decline of -14.3% raising optimism for a resurgent economy. The ZAR was still affected after the South African government suspended the issuance of the Johnson and Johnson (J&J) vaccine as well as the European jabs to assess the occurrence of blood clots. 

Precautionary measure

No issue of blood clots has been registered among 289,000 health workers that have been inoculated using the J&J jab since the rollout. The government cited the need to take a precautionary measure after the US recommended halting the vaccination drive due to reports of blood clots. 

New Coronavirus cases in South Africa

New Coronavirus cases in South Africa

The rate of new cases has declined by 95.65% from January 11, 2021, to April 12, 2021, indicating highly successful management of COVID-19 in the African economic giant. Deaths have also subsided by 95.78% from the daily peak on January 13, 2021, at 806, to a low of 34 on April 12, 2021. President Ramaphosa called for an African COVID-19 vaccine to help in the global fight against the pandemic with mutations arising.

The South African COVID-19 variant is still proving dangerous to the world after 44 cases were confirmed at Lambeth and Wandsworth in South London. The variant (B.1.351) is present in at least 20 other countries alongside the Brazilian variant (P.1) in Japan and the UK. The other variant is from the UK, known as the Kent or B.1.1.7. 

Increased mining production 

The latest statistics indicate that South Africa’s mining production surged 0.8% in February 2021 (year-on-year) after a two-year decline. Miners of iron ore contributed an increase of 65%, followed by manganese ore at +21%. As steel’s main component, iron ore is used in structural engineering and the manufacture of automobiles and ships. 

On its part, manganese sharpens the strength and durability of steel and related products such as armor plates and impact tools. We are looking at the growth of SA’s industrial economy in Q2 2021. 

Industrial production as of January 2021 declined 0.8% year-on-year after it had surged 0.6% YoY in December 2020. 

Industrial production in South Africa

Industrial production in South Africa

Production was at a record low in April 2020 AT -47.7, with the USD/ZAR pair at an all-time high of 18.5291. 

Acceleration of the US economy

The US Federal Reserve Chair’s comment on the US economy being at an “inflection point” proved significant to the market as the USD/ZAR pair rose to a high of 14.6678 on April 12, 2021. 

The economic growth is likely to be supported by increased job creation as the country continues to manage the spread of COVID-19 into Q3 2021. COVID-19 vaccination in the US is at 183 million, with the rollout expected to continue into the year. However, March 2021 data showed that inflation rose to a 2.5 year high at an increase of 0.5%.

Technical analysis

USD/ZAR analysis

USD/ZAR analysis

The USD/ZAR has slightly left the selling zone with the 14-day RSI at 34.98. The pair is likely to see a short increase as it moves towards the 15.5000 resistance level. The stochastic RSI’s price movement analysis at 16.95 gives a bullish tone for the USD against the ZAR based on a positive momentum index. However, we await to see if the impact of SA’s mining will suppress the dollar. 

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