As the new week unfolds, the USDZAR currency pair has begun its ascent, edging closer to a significant technical threshold, setting the stage for an intriguing journey ahead. Eyes are eagerly fixed on Wednesday, a pivotal day marked by the eagerly awaited budget presentation by the South African finance minister. This presentation promises insights into the government’s fiscal strategies, revenue generation plans, and revised economic projections for the approaching year.
Adding to the anticipation, Wednesday’s agenda includes the release of the FOMC meeting minutes from the US, potentially unveiling crucial clues regarding the Federal Reserve’s current stance on interest rate cuts in the foreseeable future. Presently, the CME FedWatch Tool suggests a strong likelihood of interest rates remaining steady until June. However, after the June meeting, futures market activity implies a 75% probability that rates will be lower by at least 25bps.
With such significant events looming on the horizon, the stage is set for a week brimming with potential market movements. Amidst this anticipation, the question arises: how will the USDZAR respond to these impending developments?
Technical
On the 4H chart, a breakdown occurred at the ascending channel. However, the Fibonacci midpoint provided support at 18.8594, which initiated a retracement. Resistance at 18.9192 presents the next hurdle to the retracement and could determine whether the initial breakdown could be sustained.
If the resistance at 18.9192 holds, the breakdown could be confirmed with a move toward 18.8266. The 61.8% Fibonacci golden ratio at 18.7813 is another level of interest, as it could provide a psychological support level. However, an additional leg below this support could drive the price action toward 18.7207 and 18.6693 in the longer term.
On the contrary, if the retracement breaches the 18.9192 resistance, the breakdown could fail, opening the door to a continuous bullish advance toward the 50-SMA (blue line), currently at 18.9703. The 25-SMA (green line) offers additional resistance not far above and could create a challenging barrier for the buyers to cross in the upcoming sessions.
Summary
The USDZAR currency pair started the week on the front foot, retracing its recent breakdown from the ascending channel ahead of the budget speech from South Africa later this week. Resistance at 18.9192 could be worth watching as a level of interest to determine whether the recent breakdown can be sustained.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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