The South African Rand is currently navigating a challenging terrain, experiencing a persistent depreciation against the Greenback for three consecutive weeks. This downward trajectory has spilt into the ongoing week, with the USDZAR currency pair witnessing a noteworthy uptick of as much as 30 basis points in Monday’s trading session.
The driving force behind the Rand’s decline lies in a resilient U.S. economy, bolstering the dollar’s strength. Caution surrounding the Federal Reserve’s potential delay in rate cuts has further weighed down on the Rand.
Amidst this backdrop, the U.S. economy showcased robustness through a significant uptick in December’s inflation to 3.4%, coupled with buoyant retail sales and improved consumer sentiment. These factors swiftly slashed the probability of a March rate cut from 77% to 44% in a week, amplifying the Greenback’s dominance. As we delve into the current week, all eyes are on key events. Friday’s release of the Federal Reserve’s preferred inflation gauge, the PCE Price Index, and the South African Reserve Bank’s interest rate decision are poised to provide critical insights into the USDZAR’s future trajectory and the broader economic landscape.
The USDZAR currency pair is currently riding the waves of an established uptrend, marked by its trade above the 100-day moving average and the confines of an ascending channel pattern.
The recent surge initiated from the pivotal point of 18.53428, coinciding strategically with the lower boundary of the ascending channel and the 100-day moving average. This bullish momentum carried the pair tantalizingly close to the 19.13438 resistance level, etched into the market memory from a notable selloff in December 2023 during overbought RSI conditions.
The significance of the 19.13438 level as a resistance point adds a layer of anticipation. Should it assert itself, the potential for a reversal becomes likely, particularly given the prevailing overbought RSI conditions. On the flip side, should the upward momentum persist, a breakthrough above this resistance level may trigger a high-volume breakout, bringing the 23.60% Fibonacci Extension level into focus.
The USDZAR faces a challenging landscape as the South African Rand’s persistent depreciation continues. Technical analysis points to a crucial resistance level at 19.13438, where a potential reversal may occur amid overbought RSI conditions. The market’s focus remains on key economic events, adding anticipation to the pair’s trajectory.
Sources: CME, U.S. Bureau of Labor Statistics, U.S. Census Bureau, University of Michigan, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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