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USD/ZAR Outlook: Rand Firms Against the Dollar as EM Currencies Gain

USD/ZAR Outlook: Rand Firms Against the Dollar as EM Currencies Gain

Tammy Da Costa, Analyst

Rand Dollar Outlook: Bearish continuation potential below 17.100

  • USD/ZAR continues to trade at four-month lows ahead of US CPI
  • US Dollar weakness and China’s reopening support higher commodity prices, supporting Rand strength
  • The 17.100 psychological level continues to provide support and resistance for the volatile currency pair with a move lower opening the door for bearish continuation.

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Rand Strengthens Against the Safe-Haven Dollar - Bears Determined to Break Below 17.000

USD/ZAR is currently trading lower ahead of US CPI as the reopening of China’s economy and lower yields continued to drive demand for emerging market (EM) currencies.

With the 14.4% Fibonacci retracement level of the 2004 – 2020 move providing short-term resistance around 17.365, the 17.000 psychological level remains as critical support.

Although the South African Rand has benefited from rising commodity prices and a weaker Dollar, tomorrow’s US CPI could assist in driving price action in either direction.

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Although expectations of another Fed rate hike at the upcoming FOMC have already been priced in, the size of the rate hike remains unknown.

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If the inflation reading beats estimates and price pressures remain elevated, expectations of another 50-basis rate hike could rise, driving the pair higher.

On the contrary, if inflation shows positive signs of easing, lower yields and USD weakness may continue to support the bearish outlook.

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USD/ZAR Technical Analysis

As the volatile currency pair continues to make lower highs and lows, the long upper wicks of the weekly candles above 17.100 is indicative of bearish retaliation above this zone. For bulls to regain confidence, prices would need to rise back above this level and above 17.365 to drive prices back towards trendline resistance at 17.413.

USD/ZAR Weekly Chart

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Chart prepared by Tammy Da Costa using TradingView

From the perspective of the daily chart, the resilience of the 17.000 is further illustrated as prices remain restricted below 17.100. As the 16.900 helps cap the downside move, sellers remain determined to drive prices lower.

USD/ZAR Daily Chart

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Chart prepared by Tammy Da Costa using TradingView

For the short-term move, a hold below 17.100 and below 17.00 could support bearish continuation, driving USD/ZAR back towards the next zone of support at 16.781.

--- Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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