USD/ZAR: South African growth, political concerns test bears below $16.00

• USD/ZAR seesaws around weekly bottom, pauses two-day declines.
• South African GDP snapped four-quarter advances with -1.5% figures for Q3 2021.
• Risk-on mood, softer yields and receding fears of Omicron keep sellers hopeful.

USD/ZAR takes rounds to $15.85-80, down 0.05% while challenging the previous two-day downtrend during early Wednesday morning in Europe. The South African currency (ZAR) pair struggles to cheer the broad US dollar weakness as the national GDP flashed negative surprise the previous day.

That said, South African GDP for Q3 2021 dropped for the first time in four quarters, down -1.5% QoQ versus -1.2% expected and +1.2% prior, as bearing the double whammy of coronavirus and political trauma in the nation. “South Africa's economy contracted 1.5% in the third quarter compared with the previous three months, as some of the worst unrest of the post-apartheid era in July hurt sectors like agriculture, manufacturing and trade,” said Reuters.

On the other hand, diplomats from Cape Town recently rejected the proposal to change the national constitution to explicitly allow the expropriation of land with no compensation. “Redressing them has been a flagship promise of the ruling African National Congress (ANC) but little progress has been made on it nearly three decades since the end of apartheid,” per Reuters.

Alternatively, receding fears of the South African covid variant, dubbed as Omicron, joins hopes of more stimulus from China and Japan to favor risk-on mood and weigh on the US dollar. Though, geopolitical and financial headlines concerning Russia and China keep traders cautious amid a lackluster day.

That said, the US 10-year Treasury yields drop 1.5 basis points (bps) to 1.465% while the stock futures remain mildly bid at the latest.

Looking forward, market sentiment remains as the key catalyst for USD/ZAR traders ahead of Friday’s US Consumer Price Index (CPI).

Technical analysis

While a clear downside below 10-DMA and weekly resistance line, around $16.00, direct USD/ZAR to the south, an ascending trend line from October 20, close to $15.65 at the latest, becomes key for the pair sellers to watch before taking fresh entries.