As the year draws to a close, South African traders keenly anticipate crucial economic indicators, particularly trade balance data and budget balance—to gauge the nation’s economic health.
The year 2023 has seen the South African rand grappling in negative territory against the US dollar, headed for its fourth consecutive year of depreciation. Despite hitting an all-time low in May, the rand has shown resilience by clawing back some losses.
Factors such as declining US inflation and dovish market sentiment have renewed confidence in risk assets. The market, which is pricing in a 72.8% chance of US rate cuts as early as March 2024, indicates the potential fragility of the recent dominance of the Greenback. As the new year begins, the USDZAR currency pair faces a packed economic calendar in the US, with the FOMC and key employment data likely to shape its trajectory.
Technical
The USDZAR currency pair charts a downward trajectory following its breach below the ascending channel and the 100-day moving average, confirming its downtrend. Within this descent, a notable resistance materialized at 19.13438 within the ascending channel pattern. Conversely, a pivotal support level at 18.10879, traced back to November’s established base before the pair’s upturn, proved its resilience upon retest.
Recently, the pair pivoted from this support and now hovers around the 50% Fibonacci Retracement level amidst dwindling trading volumes. Should upside momentum pick up, a breakthrough above this midpoint on high volumes could signal an upward shift in market interest. Such a scenario might direct attention towards the 19.13438 resistance level.
Alternatively, if the 50% level resists the pair’s upward momentum, it might reinforce a reversal, potentially indicating a downtrend continuation. In this case, the 18.10879 support level could regain prominence as a feasible target for the pair’s downward movement.
Summary
The USDZAR currency pair faces a decisive moment amidst South Africa’s economic evaluations and the Greenback’s nuanced dynamics. The USDZAR’s downward trajectory reflects the Greenback’s weakness. A potential upward shift hinges on momentum past the 50% Fibonacci level, whereas a reversal might open the door to the 18.10879 support.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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