The Rand has maintained a certain degree of strength against the dollar amidst a week of various fundamentals resulting in the Rand managing to end the week positive.
On Wednesday, SA Retail Sales data came in worse than expected at -3.5% versus the forecasted -2.7% resulting in the Rand weakening against the Greenback. Wednesday also brought us the FOMC Interest Rate Decision which saw the FED deciding to leave their rates unchanged as well as deciding to leave Quantitative Easing (QE) at $120 billion. The main theme we can take away from this is a weakening of the dollar due to QE increasing supply and therefore devaluing the Greenback sending the DXY lower. Despite South Africa still feeling the effects of the Corona Virus pandemic and Eskom coming under fire due to continued rolling blackouts, the Rand has managed to find support around the R14.65 level at the time of writing. Fundamentally next week, we have CPI and Core CPI data coming out for South Africa as well as GDP and Initial Jobless Claims for the Dollar.
Looking at the DXY, the Dollar has managed to creep back into the 92% level which has sustained itself as a level of resistance in the past. Should this level continue to hold as resistance coming into the end of the week, we could see pullbacks on the Dollar over the course of next week which in turn could send USDZAR lower. Should price manage to break this level, we would await a retest of 92 as support which would send the Dollar higher.
Technically, USDZAR has been trading between the R15 and R14.60 level for the week with price finding dynamic resistance around our long term trendline stemming from highs created during the initial Corona Virus lockdown. Price is maintaining it’s downward momentum creating discreet Lower Lows and Lower Highs with no real signs of a reversal to the upside just yet.
Going forward, key areas to monitor would be the level of support around R14.60 as well as the long term trendline which could potentially continue to take price lower with the psychological level of R14.00 being the next target to the downside for the Rand.
Coming to the end of the week, we have seen great opportunities in the market so far to capitalise on. With liquidity being lower today we will be monitoring the weekly and daily closures for the week ahead. As always, exercise risk management & we hope you had a great week & an even better weekend ahead. For updates directly to your email, subscribe to our blog.