Since about September this year, the USD/ZAR currency pair has been trading in a broad range between levels R14.75/$ and R13.19/$. The USD/ZAR pair now looks to have formed a reversal near the resistance of this range which is highlighted blue. The price reversal is supported by the Stochastic crossing out of overbought territory. These are bearish indications in technical analysis terms and favour short term dollar weakening against the rand. R13.40/$ becomes the initial support target favoured for the currency pair, a break of which further favours a move to R13.19/$. However should the USD/ZAR pricing instead move to close above resistance at R14.75/$, the bearish indications for the USD/ZAR highlighted would be deemed to have failed.
Ahead of the South African Reserve Bank’s monetary policy meeting on Thursday, the rand has started to resume strength against its major currency peers. However with lending rates expected to remain unchanged, the move on our domestic currency appears to be following external catalysts rather than catalysts which are purely domestic. Gains in the rand accompany gains in emerging market currencies, as short term appetite for riskier assets improves and the near certain December increase in U.S. lending rates appears mostly digested.
The chart below reflects how the market is summising all the external and domestic catalysts on the rands performance agains the dollar.