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South African Rand Price Action Setups: USD/ZAR, EUR/ZAR, GBP/ZAR

RAND ANALYSIS

  • FOMC announcement dented riskier assets this week
  • ZAR likely to end the week in the red against USD, EUR and GBP
  • Key levels apparent on all pairs which should give traders some directional bias if breached

After the hawkish Fed meeting surprise on Wednesday this past week, the Rand has fallen against majors and continuing the depreciation from last week. The U.S. dollar (as of this writing) has made strongest weekly change since September 2020 according to the U.S. Dollar Index (DXY) chart.

This weakness has been a common theme across the majority of its Emerging Market (EM) currency peers. The carry trade scenario has been impaired for the time being, which has influenced much of the ZAR’s recent gains. However, I do believe dollar strength may plateau in the short-term which could keep the rand relatively strong before the much anticipated Jackson Hole symposium in late August.

On the local front, South Africa has been moved to a stricter lockdown bracket which is likely to fetter local business activity. COVID-19 cases are rising as we enter a possible third wave which does not aid the local currency but from historical evidence we know this will only have a marginal impact as global factors remain the principal motivator behind the Rand.

RAND TECHNICAL ANALYSIS

USD/ZAR Daily Chart:

Chart prepared by Warren Venketas, IG

The daily USD/ZAR chart has made a marked change from last week with prices approaching May swing highs at 14.1998. The 50-day EMA is holding as support coinciding with the 14.0000 psychological zone. Should 14.1998 be pierced, this will open up room for a run up to 14.5000 at the 61.8% Fibonacci level.

Bears will be looking for a close below 14.0000 after which the 20-day EMA should provide initial support.

EUR/ZAR Daily Chart:

EUR/ZAR daily chart

Chart prepared by Warren Venketas, IG

EUR/ZAR looks to be trading within a long-term falling wedge pattern which could point to an extended upside should prices confirm a close above wedge resistance. Wedge resistance overlaps with the 76.4% Fibonacci retracement level at 16.8350. Therefore, a push above this horizontal zone could reveal May swing highs at 17.2399.

The Relative Strength Index (RSI) looks to be in sync with wedge resistance so a break above RSI resistance (black) could spark a bullish upturn.

A lack of bullish support could also send the pair back within the falling wedge pattern with 16.5000 serving as initial support.

GBP/ZAR Daily Chart:

GBP/ZAR daily chart

Chart prepared by Warren Venketas, IG

Pound Sterling has given some of its weekly gains back to the ZAR this morning after weaker than expected retail sales data; yet still up overall for the week. GBP/ZAR seems to have found resistance at the 50-day EMA with bulls looking to move above resistance toward the 38.2% Fibonacci at 19.8134.

Further downside could see the June 9 swing high (19.4318) as a support target with the 20-day EMA roughly around the same level.

— Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas


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