The South African Rand (ZAR) is currently holding its ground against the US Dollar (USD) ahead of the crucial South African Reserve Bank (SARB) interest rate decision later today. Market participants are cautiously optimistic, with expectations leaning towards the SARB keeping rates unchanged at 8.25%.
These expectations come despite recent inflation figures ticking up to 5.6% in February, edging closer to the upper band of the SARB’s target range of 3%-6%. However, analysts predict a downward trajectory for inflation over the next year, prompting the wait-and-see approach from the central bank.
Adding another layer of complexity is the influence of the US Federal Reserve’s monetary policy. Potential future rate cuts by the Fed could create a more dovish environment, allowing the SARB to potentially follow suit later in the year.
Technical Analysis
The 4-hour shows that the currency pair is currently trading at R18.94329, caught in a tug-of-war between bulls and bears. The price action is hovering around the 50.00% Fibonacci retracement level after encountering resistance above a supply zone. This indecision is evident as the price trades near the 20-SMA (green line), with the 50-SMA (blue line) recently crossing above the downward-sloping 100-SMA (orange line).
The RSI (53.02) trading above the 50.00 level suggests potential bullish momentum. Therefore, a sustained breakout above the supply zone could see the USDZAR target the 61.80% Fibonacci retracement level (R19.05199) as the initial resistance. A confirmed break above this level could open the door to the 78.60% Fibonacci retracement level (R19.20101) and potentially R19.39084.
Conversely, a decline below the 50.00% Fibonacci retracement level, reinforced by the 20-SMA, could bring the 38.20% Fibonacci retracement level (R18.84265) into play. A significant break below R18.84265 could see the 23.60% Fibonacci retracement level (R18.71314) and the R18.61336 support level targeted by the bears.
Summary
The USDZAR price action hinges on the upcoming SARB interest rate decision. If the bank maintains the status quo, as expected, the focus will shift back to the US Federal Reserve’s monetary policy decisions and their impact on the global financial landscape. Technically, a breakout above the supply zone opens the door for further bullish momentum, whereas a decline below the 20-SMA and the 50.00% Fibonacci retracement level could see the bears take control in the near term.
Sources: TradingView, Trading Economics, Reuters, MarketScreener.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
