USD/ZAR Outlook: Bullish above 18.00
- USD/ZAR tests a key zone around 18.200
- US Dollar strengthens after Fed minutes point to additional rate hikes.
- South Africa agrees to take on Eskom debt as load shedding (rolling blackouts) intensifies.
US Dollar Strengthens While the Rand Lacks Clarity – Prices Stall Around 18.200
USD/ZAR is currently hovering around 18.200, finding support above the psychological level of 18.00.
With the emerging market (EM) currency currently on track to achieve six consecutive weeks of gains, the resilient US economy has helped drive the pair lower.
As South Africa continues to suffer from hours of planned electricity outages (known as load shedding), the country has succumbed to the effects of declining productivity.
Although the major power utility Eskom has been granted a $13.9 billion bailout, a strong Dollar and a robust labor market have bolstered demand for the safe-haven greenback. For the volatile Rand, both technical and fundamental factors continue to weigh on price action.
USD/ZAR Technical Analysis
After rising back above 18.00 earlier this month, USD/ZAR has continued to climb toward the October ’22 high, holding as resistance at 18.579. While the pair remains vulnerable to changes in the growth outlook and prospects of higher rates, a shallow-bodied candle has appeared on the daily chart.
USD/ZAR Daily Chart
Chart prepared by Tammy Da Costa using TradingView
With prices currently hovering around 18.200, a move higher could open the door for upside potential. If the Dollar strengthens and the pair holds above 18.400, the October high could remain in sight. As the rising trendline from the current month low remains intact, the pause in today’s price action could be indicative of indecision, suggesting an important zone of technical support and resistance.
Although technical levels suggest that the pair may continue to rise, the 18.00 handle remains key. If South Africa continues to face more power outages, the upside could be supportive of additional gains.
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
