Rand Report

USD/ZAR starting to gain but finding short term resistance at the R13.15/$ level

The Technicals

After what appears to have been a false break of the R12.85/$ level, the rand has resumed is short term weakness against the US Dollar and is now finding resistance at the R13.15 level. Circled blue we see the false break of the R12.85/$ level which took the form of a morning star candle pattern. The candle pattern suggests the end to the recent move lower and possible change in near term direction, which appears to have started already. The reversal pattern was supported by a strong move out of oversold territory by the Stochastic.

The broader picture for the currency pair suggests a sideways market. The reversal off support has already occurred (circled blue) as mentioned earlier. To unlock further gains for the USD/ZAR pair, a break of the R13.15/$ level is needed, which could open up a move back to the R13.50/$ mark. 

The news

The weakening of the rand over the last few days has been catalysed by a resurgence in the dollar rather than by domestic catalysts. The US dollar has strengthened (against most currencies) as the region finds some short term reprieve from geo-political tensions and inclement weather fears.

Possible directional Catalysts

Catalysts for the remainder of the week to watch in relation to the USD/ZAR currency pair are as follows:

Thursday - The South African Reserve Bank (SARB) will release the quarterly market bulletin where market will be most concerned with the regions current account is fairing as a percentage of Gross Domestic Product (previously -2.1%). Thursday will also see CPI Inflation data and Weekly Employment data out of the US.

Friday – Markets will look to Core retail and retail sales data out of the US as potential directional catalysts for the market. 

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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