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Rampant Rand Clings on to Best Performing Currency Against USD YTD

8

RAND ANALYSIS

  • Rand resilient after native inflationary knowledge.
  • Threat-off sentiment dismissed by ZAR bulls.
  • USD/ZAR trading at key space of confluence.
Commercial

ZAR FUNDAMENTAL BACKDROP

TAILWINDS FOR THE RAND

The South African rand stays on the high spot globally as the very best performing currency in 2022 in opposition to the U.S. greenback. A current enhance added to the already flourishing ZAR with South African inflation for the December interval beating estimates and consequently including to price hike bets later this month (27th January) when the SARB MPC meets. A price hike ought to keep carry trade attraction consistent with anticipated U.S. price hikes. From a year-on-year perspective, the December studying was the 5th consecutive enhance which may have critical penalties for the common shopper ought to the issue persist.

CURRENCIES VS U.S. DOLLAR YTD

global fx vs us dollar

Supply: Reuters

Latest Chinese language price cuts to key charges in hopes to bolster a slowing economic system ought to lend itself to a supportive setting for the rand with China being such an integral trading associate with South Africa.

An overextended greenback might be additional exacerbated subsequent week (a day earlier than the SARB assembly) ought to the Federal Reserve underwhelm markets who’re anticipating a stout hawkish narrative.

HEADWINDS FOR THE RAND

Native unemployment charges lingers at file highs, reflecting a poor labor market and might be aggravated by steep price hikes. The battle between inflation and the native economic system will show to be a tough path to navigate with out letting both variable get out of hand.

Russia-Ukraine tensions which have flared up this Friday have resulted in a broad primarily based risk-off response from markets nonetheless, rand headwinds have managed to shrug off any negativity for now.

Omicron though dwindling when it comes to market factoring, stays a significant affect in China and has proven to add to inflation woes globally with lockdowns in varied areas throughout the nation. This zero tolerance strategy is opposing present efforts to stimulate financial development and subsequently hamper rand beneficial properties.

TECHNICAL ANALYSIS

USD/ZAR DAILY CHART

USDZAR daily chart

Chart ready by Warren Venketas, IG

Channel help has damaged as soon as extra, final seen since October final 12 months with help discovered on the November swing low at 15.1525. The decrease lengthy wick left behind by yesterday day by day candle suggests the potential for an upside transfer to come. Though the Relative Power Index (RSI) is deep in bearish territory, USD/ZAR is slowly approaching oversold territory.

There’s room for extra draw back to the 15.0000 psychological deal with however worth motion is very dependent on subsequent week’s rate of interest selections which ought to enable for some directional bias.

Resistance ranges:

  • 16.0000
  • 15.5563 (January swing low)
  • 15.4289 (50% Fibonacci)

Help ranges:

  • 15.1525 (November swing low)
  • 15.0000

Contact and observe Warren on Twitter: @WVenketas

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