The rand managed to pull the pair to a daily close below the 50-day MA, yesterday, off the back of a broadly weaker dollar. There was no data driving the weakness in the greenback but it seems the weakness is stemming from the “plausible soft landing” narrative and the stable decline in US 10-year bond yield since the beginning of the year.
Today’s calendar has the potential to kick-start a fresh trend on the USD/ZAR pair. The 50-day MA, currently at 17.14, has acted like a magnet these past 5 trading sessions with no clear break as of yet. The 200-day MA at 16.91 is creeping higher and will serve as a key support rate in today’s potentially wide range session. The 200-day MA also coincides with the neckline of the blue channel.
Events for the day: The SARB will announce their first interest rate decision today and it is widely expected that the bank will hike rate by another 50bps up to 7.50%, no real surprises there. The SARB will stick to their hawkish stance as SA inflation (7.500%) still sits stubbornly above the 3-6% target range.
The volatility will come from the US GDP print for 2022Q4. QoQ growth is expected to print 2.6% down from 3.2% in 2022Q3. It is becoming increasingly difficult to gauge how the markets will digest macro data releases but a print below expectations will be dollar positive as it will dent the “soft landing” narrative while a higher-than-expected print will add fuel to the risk-on fire in my opinion.
Scenarios:
1. Stronger than expected US GDP: USD/ZAR to break below the 200-day MA and possibly test the current yearly low of 16.70.
2. Weaker than expected US GDP: Confirmed break above the 50-day MA to push higher and test the resistance range between 17.39 (blue 38.2% Fibo retracement) and 17.50 (orange 23.6% Fibo retracement rate). I’m personally favouring this scenario, but it obviously depends on how they cook the data haha.
Technical indicators: Bullish divergence is still present on the RSI (rand negative). The MACD indicator is still holding a daily buy signal, but its momentum has pattered out this week, but the buy signal is still rand negative. The DXY is also hovering in a strong support range and its weekly RSI is nearing oversold levels which may support the greenback in the weeks to come (see the attached snippet)
Today’s calendar has the potential to kick-start a fresh trend on the USD/ZAR pair. The 50-day MA, currently at 17.14, has acted like a magnet these past 5 trading sessions with no clear break as of yet. The 200-day MA at 16.91 is creeping higher and will serve as a key support rate in today’s potentially wide range session. The 200-day MA also coincides with the neckline of the blue channel.
Events for the day: The SARB will announce their first interest rate decision today and it is widely expected that the bank will hike rate by another 50bps up to 7.50%, no real surprises there. The SARB will stick to their hawkish stance as SA inflation (7.500%) still sits stubbornly above the 3-6% target range.
The volatility will come from the US GDP print for 2022Q4. QoQ growth is expected to print 2.6% down from 3.2% in 2022Q3. It is becoming increasingly difficult to gauge how the markets will digest macro data releases but a print below expectations will be dollar positive as it will dent the “soft landing” narrative while a higher-than-expected print will add fuel to the risk-on fire in my opinion.
Scenarios:
1. Stronger than expected US GDP: USD/ZAR to break below the 200-day MA and possibly test the current yearly low of 16.70.
2. Weaker than expected US GDP: Confirmed break above the 50-day MA to push higher and test the resistance range between 17.39 (blue 38.2% Fibo retracement) and 17.50 (orange 23.6% Fibo retracement rate). I’m personally favouring this scenario, but it obviously depends on how they cook the data haha.
Technical indicators: Bullish divergence is still present on the RSI (rand negative). The MACD indicator is still holding a daily buy signal, but its momentum has pattered out this week, but the buy signal is still rand negative. The DXY is also hovering in a strong support range and its weekly RSI is nearing oversold levels which may support the greenback in the weeks to come (see the attached snippet)
