The USDZAR currency pair is currently navigating a landscape shaped by recent macroeconomic developments. After experiencing back-to-back weeks of decline, the pair appears poised for a potential resurgence, with a notable gain of 30 basis points recorded this week alone.
This shift comes on the heels of higher-than-expected U.S. inflation figures, which propelled the Greenback higher, reaching 3.5% in March, up from 3.2% the previous month. This uptick in inflation has prompted market participants to recalibrate their expectations, delaying anticipated rate cuts in the U.S. until September.
However, amidst these global shifts, the South African Rand demonstrated resilience, buoyed by robust domestic economic indicators. Notably, recent data from Statistics South Africa revealed significant growth in both mining and manufacturing sectors, with mining output surging by 9.9% year-on-year in February and manufacturing output accelerating by 4.1% over the same period. As markets digest these signals, the stage is set for a nuanced exploration of the factors influencing the USDZAR pair’s trajectory.
Technical
The USDZAR currency pair is undergoing a notable shift in sentiment, favouring the upside after a period of downward movement. Previously confined within a descending channel pattern and trading below the 100-day moving average, the pair recently broke out of this pattern and aligned with the moving average.
Initially encountering resistance around the 18.85659 level during the downtrend, selling pressures eased at 18.41019, establishing a support level amidst oversold RSI conditions. The pair’s rebound gained traction as buying pressures intensified, propelled by economic data bolstering the Greenback. This shift in sentiment was underscored by the breakout above the descending channel pattern, followed by a test of the 100-day moving average.
While the pair has yet to encounter the 18.85659 resistance level, sustained upside momentum may prompt a full retest. Conversely, a resurgence in selling activity could trigger a downturn, potentially exposing the pair to the 18.41019 support level. As market participants navigate these dynamics, attention remains on the interplay between technical indicators and broader economic trends, shaping the trajectory of the USDZAR pair.
Summary
Despite recent setbacks, the USDZAR pair exhibits signs of potential resurgence amid higher U.S. inflation. Breaking out of a descending channel pattern, it may retest resistance at 18.85659, supported by a shift in sentiment and technical indicators. Attention remains on key levels and economic influences.
Sources: Federal Reserve, U.S. Bureau of Labor Statistics, CME, Statistics South Africa, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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