RAND ANALYSIS
- Agency greenback open tames rand bulls.
- Rand-linked commodities open decrease.
- Potential Omicron unfold in China may harm ZAR.
ZAR FUNDAMENTAL BACKDROP
After final week’s Non-Farm Payroll (NFP) miss on the headline determine, the dollar is buying and selling marginally larger this morning as a deep dive into the information reveals a largely optimistic launch for the U.S. labor market. Unemployment fee and wage knowledge got here in stronger thus favoring the hawkish slant from the Federal Reserve. This bodes properly for the U.S. dollar nonetheless with markets backing greenback upside in latest weeks, the buildup in lengthy positions are fairly substantial which factors to Fed hawkishness largely priced in; opening up rand reward ought to fundamentals enable.
Regardless of estimates that the Fed will hike charges with comparatively excessive incidence (thus decreasing the carry commerce enchantment), the South Africa Reserve Financial institution (SARB) has hinted that it will not sit idle ought to this play out. Nonetheless, rising U.S. Treasury yields proceed to help an appreciating greenback going ahead.
Later this week (see calendar beneath), U.S. inflation may give one more push for greenback bulls ought to precise figures are available larger than prior. Even when the core (Fed’s most well-liked measure) forecast is missed however stays larger than 4.9%, markets are more likely to favor a stronger greenback.
USD/ZAR ECONOMIC CALENDAR
Supply: DailyFX economic calendar
South African main commodity exports together with gold, iron ore, platinum and coal are all beneath strain in early buying and selling giving no help to the native foreign money.
From a COVID-19 perspective, the opportunity of shutdowns in China can’t be dominated out after mass testing is underway within the main port metropolis of Tianjin. This might hamper world commodity costs and take away sustenance from Emerging Market (EM) currencies just like the rand.
TECHNICAL ANALYSIS
USD/ZAR DAILY CHART
Chart ready by Warren Venketas, IG
After hitting recent 2022 lows on Friday, USD/ZAR discovered help at 15.5563. The bull flag channel (blue) lengthens this week and could also be in play for a while earlier than a breakout takes place. There stays room for additional draw back in direction of the important thing space of confluence across the 15.5000psychological level (coinciding with 100-day EMA and 50% Fibonacci).
Momentum backs USD/ZAR draw back with the Relative Strength Index (RSI) properly beneath the midpoint 50 degree.
Resistance ranges:
- 16.0000
- 50 and 20-day EMA’s respectively
Help ranges:
- 15.5563
- 15.4289/100-day EMA
Contact and comply with Warren on Twitter: @WVenketas
