South African Rand continues to trade near 100-day SMA

USD/ZAR trades near the 100-day SMA hurdle at 17.29.
Recent price action and indicators suggest the bounce from the June 10 low has ended.

USD/ZAR is flirting with the 100-day simple moving average (SMA) for the third straight day. At press time, the SMA is located at 17.2924.

On June 11, the pair crossed above the major average, then located at 16.97. However, so far, the follow-through to the bullish breakout has been dismal. The pair repeatedly failed to take out the psychological hurdle of 17.50 in the five trading days to June 24 and fell back below the 100-day SMA on the following day.

It looks as though the bounce from the June 10 low of 16.32 ended near 17.50 last week and the broader downtrend from April highs above 19 is about to resume.

Supporting the bearish case is the 14-day relative strength index, which remains in the bearish territory below 50. The daily chart MACD histogram, an indicator used to identify trend changes and trend strength, is producing lower bars above the zero line, a sign of uptrend exhaustion.

All-in-all, a fresh drop toward the June 10 low of 16.32 may be seen in the short-term. The South African Rand looks set to eke out gains despite health officials recording a steeper rise in coronavirus infections over the weekend. According to a central bank estimate, South Africa’s economy is likely to contract by 7% in 2020, having entered a recession in the final quarter of 2019.