The USDZAR currency pair has faced some challenges recently, with the South African Rand showing strength throughout the week. This comes despite a notable increase in the US Dollar following the release of the hotter-than-expected US CPI report. One factor potentially driving the strength of the South African Rand is the impressive retail sales data. Year-over-year figures exceeded expectations, reaching 2.7%, a significant improvement from the forecasted -0.7% and a swift recovery from the previous -1%. Additionally, the month-on-month figure saw a slight uptick from 1.1% to 1.4%.
In contrast, the US reported softer retail sales data, with the month-on-month figure slipping to -0.8%, falling short of the expected -0.1% and dropping from the previous 0.4%. Looking ahead, the US PPI data could add some final twists to the week’s events, potentially sparking some last-minute movements in the currency pair before the week draws to a close.
Technical
On the 4H chart, a breakdown has occurred at the ascending channel. However, a retest is currently in motion at 18.9192, which could be pivotal in determining the future directional trend. The 100-SMA (orange line) is providing support to the retest, and with the 25-SMA (green line) trading above the 50-SMA (blue line), the momentum still lies with the bulls in the shorter term.
The breakdown could be sustained if resistance at 18.9192 holds in the upcoming session. The Fibonacci midpoint at 18.8594 could then be a level of interest, as an additional breakdown could result in the currency pair reaching the 61.8% Fibonacci golden ratio at 18.7813.
However, the bullish price action could be sustained if the pair moves above the 18.9192 level. The 50-SMA resistance near 18.9855 could be of importance, and if the price clears this level, the price action within the ascending channel could be sustained toward 19.1006 and 19.2031 in the longer term.
Summary
The USDZAR currency pair is teasing a channel breakdown after the US dollar pulled back on softer-than-anticipated retail sales data. A retest of the breakdown is underway at 18.9192, and if this resistance holds, the bearish trend could be sustained toward 18.8594.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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