The rand report

Catalysed by economic data both domestic and International last week (including new South African mining charter & hawkish Federal Reserve), the rand (ZAR) has started to weaken sharply against the US Dollar (USD) in the short term.

The next few daily charts of the USD/ZAR show how the economic data has been pricing into the currency pair and the suggestions for future movements. 

Chart 1: Bullish Engulfing (circled blue)

The USD/ZAR has been trending lower (dollar weakness/ rand strength) since mid-April 2017. Circled blue we see a bullish engulfing candle pattern marking a possible end to the short term decline. The green candle within the circled “engulfing” pattern would reflect the reaction of the rand to news of a new mining charter released by the Mineral Resources Minister, Mosebenzi Zwane.  

Chart 2: Falling Wedge rand

The recent move down for the USD/ZAR took the shape of a falling wedge pattern, which is said to warn of a bullish move to follow. The patterns suggestion has started to ring true as the USD/ZAR has now broken out of the wedge with the rand starting to weaken noticeably against the dollar. The move higher has gained further traction following comments from South Africa’s Public Protector, who has suggested changing the constitution and policies relating to the Reserve Banks inflation targeting mandate. 

Chart 3: Wedge Targets

The short term moves up for the USD/ZAR pair have been more aggressive than the moves down, supporting the view of continued gains for the pair (USD strength ZAR weakness). The pattern suggests the next resistance target to be located at R13.20/USD. A break of this level further opens a move to the next level of resistance considered at R13.65/USD. Breakout traders might hope for a pullback towards the R12.70/USD level for long entry, while using a close below R12.50/USD as the failure level for the anticipated currency move. 

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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.