The South African Rand (ZAR) stumbled against the Euro (EUR) in early Tuesday trading, caught between conflicting fundamental and technical forces. Fundamentally, both currencies face their own sets of challenges.
Eurozone PMIs on Tuesday could impact the near-term direction. An unexpected fall or downward revision could weaken the Euro by stoking recessionary fears in the region. Despite dovish hints from the ECB, inflationary concerns linger, keeping a rate cut narrative at bay for now. This lack of a clear catalyst for Euro appreciation weighs on the currency.
In spite of South Africa’s economic woes, the Rand has shown unexpected resilience, potentially due to a weaker dollar and recent positive domestic data, including the trade surplus and a narrower budget deficit. However, global risk aversion and potential trouble ahead for South Africa’s economy remain risks to the Rand’s stability.
Technical
Currently hovering around R20.23, the EURZAR sits below the 20-SMA (green), 50-SMA (blue), and 100-SMA (orange). This bearish alignment suggests potential downward pressure. The recent crossover of the 20-SMA above both the 50-SMA and 100-SMA indicates a potential shift in momentum, but the price action needs to sustain this move for confirmation, with the RSI at 42.86, offering little directional guidance.
Bulls could look for opportunities near the R20.28459 initial resistance if the price action continues their’ rebound. A breakthrough above the initial resistance could open doors for upward moves towards the R20.37424 and R20.43828 resistance levels.
Short-term trading opportunities could exist towards the R20.12450 support level if the price continues to decline. A break below this level could confirm the bearish momentum, potentially targeting the R20.00443 support zone.
Summary
EURZAR sits at a crossroads, weighed down by a lack of clear fundamental catalysts and conflicting technical signals. While the bearish bias in the short term cannot be ignored, potential opportunities exist for both bulls and bears depending on price action around key support and resistance levels.
Sources:TradingView, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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