The Rand Report

Employment data renews ZAR weakness.

Last week we looked at the USD/ZAR price breaking out of a falling wedge formation following domestic news catalysts (New Mining Charter, Public Protector Comments). R13.20/$ was identified as the next upside target, while conservative breakout traders were looking for a pullback towards R12.70/$ to buy the currency pair.

Over the last week the USD/ZAR did pullback, but not quite as far as R12.70/$, but rather reaching a low of R12.80/$. Circled blue we see how the currency pair has reversed off this level once again. The catalysts for dollar strength / rand weakness, this time, has come from disappointing employment data being released out of South Africa. The pattern circled blue once again is called a bullish engulfing candle pattern. Implications are that the pullback has ended and further gains on the USD/ZAR pair are expected. R13.20 once again becomes the upside target favoured from the chart pattern (wedge) and candle pattern (bullish engulfing). A price close below R12.80 (recent support) might be used as a failure level by short term traders. The current setup suggests a risk to reward (R:R) scenario of just better than 1 to 1. While this might not be the most favourable R:R scenario, a break above the R13.20/$ level, could improve the reward assumption by opening up a possible move to R13.65, which would be considered the next upside resistance target. 

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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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