The USDZAR currency pair showed robust performance last week, gaining a solid 2%, and it continued its positive momentum into Monday’s session. The upward movement was driven by a shift in trader sentiment following the release of last week’s job data.
The US Non-Farm Payrolls (NFP) report exceeded expectations, with 216,000 jobs added, affirming the labour market’s resilience. This unexpected strength prompted traders to reassess their predictions on potential rate cuts by the Federal Reserve. Consequently, the likelihood of lower rates after the March meeting decreased from 88% a week ago to slightly above 60%. Looking ahead, Thursday’s US Consumer Price Index (CPI) data could introduce further dynamics to the currency pair, presenting diverse opportunities for traders in the upcoming week.
Technical
On the 4H chart, an ascending channel is present, with the 25-SMA (green line) providing support at 18.6815. The recent crossing of this 25-SMA above the 50-SMA (blue line) and 100-SMA (orange line) confirms the momentum tilt in the bulls’ favour.
If the currency pair manages to move above 18.7098, the channel formation could hold firm, leading to a potential retest of resistance at 18.8021. A supply zone at 18.8918 could then be a level of interest as it converges with the dynamic resistance of the channel and could determine whether a pullback within the channel will occur or whether a breakout is on the cards for a steeper uptrend toward 18.9980.
However, a leg below the 25-SMA could trigger a longer pullback toward 18.5911, near the dynamic support of the channel. A potential channel breakdown could see the pair looking for support at 18.4894, the Fibonacci midpoint, which could act as a pivot point for a retest of the breakdown level. However, the 61.8% Fibonacci golden ratio could be a level of interest if the breakdown occurs, offering further support at 18.4071.
Summary
The USDZAR currency pair continued its bullish momentum from the prior week into the Monday session, underpinned by support from the 25-SMA. This support at 18.6815 could be crucial in the upcoming sessions, as the currency pair could trade in thin ranges leading up to the US CPI report on Thursday.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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