USD/ZAR cheers US dollar weakness near 11-week low under 17.00

USD/ZAR pays a little heed to Brazilian hardships while declining to 16.91 during the early Asian session on Thursday. In doing so, the pair takes clues from the broad US dollar weakness amid risk-on sentiment.

US dollar index (DXY) seesaws around the lowest since March 12 while flashing 97.30, up from the previous day’s bottom of 97.18, by the press time. The greenback recently dropped as market optimism weighed on the US currency’s safe-haven demand.

The risk-on sentiment seems to have taken clues from the US President Donald Trump’s step back from the use of the military to stop riots at home as well as no sanctions for China’s President Xi Jinping for the Hong Kong issue. Also supporting the optimism could be the upbeat activity data and hopes of economic recovery.

On the other hand, Brazil’s central bank policymaker Fábio Kanczuk recently said, as per the New York Times, “a level of 2.25% for Brazil's benchmark Selic interest rate is not written in stone.” The comments suggest further rate cuts from the Central Bank of Brazil.

Also on the negative side could be the rising coronavirus (COVID-19) woes. On Wednesday, Brazil counted a record 1,262 deaths overnight, according to the country’s health ministry, which in turn makes the surge the biggest since the virus outbreak in the nation. Furthermore, haters for the President Jair Bolsonaro and downbeat Industrial Production for April, published the previous day, could also be noted as downbeat catalysts for the Brazilian currency.

Even so, the market’s are currently more interested in looking for the US dollar catalysts and hence today’s ECB monetary policy meeting, as well as the US Jobless Claims, will be the key to watch for immediate direction.

Technical analysis

100-day SMA around 16.85 offers immediate support to the pair ahead of dragging it to 15.78 mark comprising 200-day SMA. Meanwhile, a three-week-old falling trend line near 17.33 could restrict the pair’s immediate upside.