USDZAR: Post unexpected SARB rate pause.

Jul 27

The pair managed to surge past the 200-day MA at 16.57 last week after the unexpected decision from the SARB to leave the repo rate unchanged at 7%.

The pair touched a 4-month high of 16.97 before consolidating to close the week at 16.81. The next critical support levels to watch are the 50% fibo at 16.65 and the 200-day MA at 16.57. I expect these levels to be tested over the coming trading sessions but a failed break the phycological 16.50 handle will support the bigger trend highlighted in the original idea.

Additionally, the ZA10-year minus the US10-year yield is climbing higher, just over 4.25% which is rand negative.

The fundamental analysis highlighted in the previous/linked idea remains broadly unchanged.

Aug 6

Note

The rand has managed to regain all its losses after the SARB rate pause and then some. The rand was afforded the room to move following the Yen-tervention last week coupled with a bout of risk-on sentiment in anticipation of a MOU between the US and Iran, which has weakened the broad-based dollar index.

The pair has fallen below the critical support levels at 16.54 (200-day MA) and 16.41 (50-day MA) and has settled just above the 61.8% Fibo retracement of 16.25. Tomorrow's US non-farm payrolls for June could be a catalyst for another leg higher in the DXY which will see the USDZAR pair re-test the 16.50 handle as the 200-day MA and 50-day MA swings from a support to a resistance. The payroll print will have to be higher than expected for this move to play out as it will increase the bets for a possible Fed rate hike in September.

A weaker than expected payroll print will however allow the rand to re-test the red support range below 16.25 which has kept the rand at bay since March this year.