Bias: Bullish, as the ZAR is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
• Rate gap: The South African Reserve Bank's recent interest rate cut may reduce the yield gap compared to the US, potentially affecting the ZAR's appeal.
• Risk/commodities: The recent strength of the Rand is supported by increasing prices in precious metals, boosting investor confidence.
• One macro factor: US labor data shows a surprising drop in unemployment, which could temper expectations for Federal Reserve rate cuts.
Range: The ZAR/USD is likely to hold its current level with possible slight drifting within the recent 3-month range.
What could change it:
• Upside risk: A further rally in precious metals could strengthen the ZAR.
• Downside risk: Any dovish signals from Fed policymakers regarding future rate cuts could weaken the USD and impact the ZAR/USD balance.