Fxequity

Greenback Bid As Threat Aversion Extends, Rand to Check 16.00?


RAND ANALYSIS

  • Market sentiment rejects riskier rand.
  • Key U.S. information prints could also be overshadowed by COVID-19 scenario.
  • USD/ZAR channel break.

ZAR FUNDAMENTAL BACKDROP

YEARLY HIGHS FOR USD/ZAR AS RISK OFF SENTIMENT GRIPS FX MARKETS

Final week’s Emerging Market (EM) currency selloff was underway after Turkey’s central financial institution determined to chop rates of interest and continued into Friday’s market shut when European COVID-19 instances sparked contagion fears. Right now, the rand opened marginally greater towards the U.S. dollar regardless of its safe-haven attraction as pandemic uncertainties stay. Different conventional safe-havens such because the Japanese Yen (JPY) and Swiss Franc (CHF) have prolonged their features which may see the rand weaken towards the buck because the buying and selling day progresses.

U.S. ECONOMIC DATA IN FOCUS THIS WEEK

U.S. manufacturing PMI data and core PCE inflation information (Fed’s most popular metric) are anticipated this week (see financial calendar under)nonetheless greater than forecasted prints could not have the standard impact this week as markets mull over the COVID-19 scenario in Europe. A cagey strategy could also be adopted because the potential of a broadening pandemic may additional dampen hawkish prospects. From a USD/ZAR perspective, the rand stays susceptible to additional weak spot whereas world influences dictate.

DFX econ calendar

Supply: DailyFX economic calendar

TECHNICAL ANALYSIS

USD/ZAR DAILY CHART

USD/ZAR daily chart

Chart ready by Warren Venketas, IG

On Friday, we noticed contemporary yearly highs come into play because the January swing excessive at 15.6648 resistance stage was breached by a day by day candle shut. The lengthy standing resistance now turned assist shall be an essential stage to watch this week. Channel resistance (yellow) was included within the upside rally and coincides with the 15.6648 stage.

Ought to price action stay above 15.6648 and channel resistance we may see bulls pushing for the 16.0000 psychological handle – final seen in November 2020.

The Relative Strength Index (RSI) is suggestive of bearish divergence which eludes to the contradictory transfer in USD/ZAR worth motion (greater highs) to the RSI indicator (decrease highs). Historically, technical analysts use this as a bearish sign whereby costs are anticipated to reverse from their present bullish trajectory. A tentative strategy ought to be exercised with this technique as timings could be unsure.

Resistance ranges:

Assist ranges:

  • 15.6648 – January 2021 swing excessive/channel resistance (yellow)
  • 15.5735
  • 15.4289 – 50% Fibonacci level

Contact and observe Warren on Twitter: @WVenketas





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