The week kicked off with the USDZAR currency pair holding steady, setting the stage for a flurry of crucial data releases. Following last week’s upward momentum, driven by the South African Reserve Bank’s decision to maintain the repo rate at 8.25% and its consistent hawkish stance, the Rand looks to continue its trajectory in a pivotal week. While the week began at a measured pace, anticipation grows for Thursday’s US PCE Price Index, offering insights into the US economy’s inflationary landscape.
Before this impactful event unfolds, South Africa is poised to unveil its PPI in an eagerly anticipated supply-side inflation report earlier that same day. These upcoming releases promise an exhilarating week ahead for this currency pair, potentially sparking a fresh trajectory in pricing dynamics.
Technical
On the 1D chart, a descending wedge has formed, with last week’s bullish run triggering a breakout from the dynamic resistance. However, resistance was met at 18.8823, causing the price to move back below the 50-SMA (blue line), signalling a potential fake-out.
With support at 18.7451 holding the sellers at bay, the retracement may fail to sustain. However, a breakdown at the current support could trigger a retest of the breakout level if the currency pair can cross below the 100-SMA (orange line) and 25-SMA (green line), which could provide strong support. In this case, the pair could look toward 18.4350 as a potential pivot point to enforce a reversal.
Conversely, a breakout above 18.8823 could see the upside momentum continuing. The 61.8% Fibonacci golden ratio is at 19.0602, which could provide resistance. However, the supply zone at 19.1981 is a psychological resistance level not far above the golden ratio and presents the currency pair’s most significant hurdle to a potential sustainable uptrend.
Summary
Ahead of a crucial week, the USDZAR currency pair is gearing up for the market-moving data releases in the US PCE Price Index and South African PPI. The 50-SMA at 18.8119 could be a key level to look out for to determine whether the bulls or the bears are gaining the upper hand in what could be a volatile trading week.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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