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USD/ZAR – US Dollar Continues Building Powerful Pattern vs SA Rand

USD/ZAR – US Dollar Continues Building Powerful Pattern vs SA Rand

Paul Robinson, Strategist

USD/ZAR Highlights:

  • USD/ZAR wedge continues to develop
  • Breakout in-line with other $/EM pairs looks probable

USD/ZAR wedge continues to develop

USD/ZAR price action remains ho-hum in the near-term as volatility declines during the process of building a high-level wedge. What is meant by ‘high-level’ is that the retracement from the Q1 run has been quite shallow, a bullish development indeed.

It could take some more time for the pattern to fully develop, as has been said a few times recently, but worth mentioning again as the time it takes to get from the beginning stage of a pattern to the actual trigger signal can seem like a long time. The bottom line is patience may be needed (maybe not).

A trigger will come on a break of the top-side trend-line (around 19 at this time), with a crossing of 19.34 as a full-on breakout. In the event of a breakout a move to above 20 or higher could be in the works quickly. There has been a lot of USD pressure on EMs since the coronavirus started, and another round could be in the works against not only ZAR, but BRL, RUB, MXN, TRY, and others.

This makes watching those other currencies important as well, as they could give indications as to whether we see USD/ZAR thrust powerfully higher, or if possibly some relief may be on the way for ZAR and the EM space.

For now, just looking at the situation with the Rand, keep close tabs on how the development of the wedge plays out. A hard drop through 18.02 and then 17.76 would be a blow to the bullish thesis and could see a sizable chunk of the Q1 up-move reversed. Otherwise, things will continue to look neutral to bullish.

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USD/ZAR Daily Chart (wedge continues to build)

USD/ZAR daily chart, wedge continues to build

USD/ZAR Chart by TradingView

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---Written by Paul Robinson, Market Analyst

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