Following a notable rise during Thursday’s trading, the South African rand encountered a setback in the early hours of Friday, setting the stage for the eagerly anticipated Non-Farm Payrolls (NFP) report. Recent market sentiment, leaning towards the belief that the Federal Reserve has completed its cycle of interest rate increases and is now contemplating a shift towards more accommodative policies, has placed a dent in the dollar’s recent strength.
Despite this, local challenges have curtailed the potential for significant gains in the South African rand, resulting in the USDZAR currency pair moving within a defined trading range, patiently awaiting the release of the latest employment data. Earlier this week, the US ADP Employment Change fell short of the anticipated 130K consensus, registering at 103K. Now, as the NFP report looms on the horizon, the market anticipates a print of 180K, an increase from the previous 150K. However, the question remains: could there be another unexpected twist in the tale?
Technical
On the 4H chart, an ascending channel is present, with the currency pair using the dynamic support to push above the 25-SMA (green line) in a reversal of the prior day’s downturn. Resistance at 18.8985 could be crucial in the Friday session, which holds the promise of directional movement in the US dollar following the jobs report.
Should the pair cross above the resistance at 18.8985, the channel formation could hold, with resistance at the prior peak of 18.9911 then becoming a level of interest. While a pullback within the channel could occur at this level, the bulls could seek to test resistance at 19.0414 in the upcoming sessions to break the channel formation into a new uptrend.
However, failure to cross the 18.8985 resistance could result in another downturn, which could send the pair below the 25-SMA in a potential momentum shift. The Fibonacci midpoint at 18.7819 converges with the 50-SMA (blue line) to offer psychological support that could prevent a channel breakdown. However, if the pair crosses below the 61.8% Fibonacci golden ratio at 18.7328, a new downtrend could form toward 18.6652 at the 100-SMA (orange line).
Summary
Leading up to the US jobs data, the USDZAR currency pair is taking back some of its prior day losses. Resistance at 18.8985 could be crucial in the upcoming hours to determine the sustainability of the current bullish run.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. 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. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.
