technical analysis USDZAR

Technical analysis of USDZAR

The rand has remained relatively strong over the last few weeks against many major currencies as risk appetite continues to be high for the most part. However, the budget for the upcoming fiscal year in South Africa has raised some concerns among participants around the government’s ability to cut its wage bill without raising taxes. This technical analysis of USDZAR looks at the daily chart.

There is no obvious high resistance on this chart. R16 might be an important psychological area but moving averages are likely to be more important before this zone could be tested. R14.40, the area of the latest supports and a low of more than 13 months, is still in view.

Technical indicators on USDZAR D1


Moving averages still give a strong sell signal, with each of the 50, 100 and 200 successively below slower lines and above the price. However, the value area between the 50 SMA from Bands and the 100 has now shrunk to less than 20 cents. The initial resistance from moving averages is the 50 from Bands which was tested unsuccessfully on Monday. Above this, consolidation within the value area below the 100 SMA seems to be possible unless there’s a significant change in fundamentals and sentiment.

The slow stochastic (15, 5, 5) completed an upward crossover in oversold late last week and at 36 is now slightly closer to neutral than oversold. Bollinger Bands (50, 0, 2) have shrunk since December 2020, which might suggest that it will at least take time for another leg down to appear.

Price action and Fibonacci


The descending triangle from the start of 2021 to now should probably be understood in the context of this symbol’s usually high volatility. It seems to support the overall negative impression but many traders might wait for a confirmation of some sort from candlesticks, maybe another failed test of the 50 SMA from Bands or even something as simple as a large downward candle following today’s big up period. Given the clear fundamental downward movement by the dollar here on the weekly chart, many traders might want to avoid opposing a strong trend by buying.

The most obvious target for sellers from Fibonacci is the 100% weekly retracement area, i.e. full retracement of all the dollar’s gains in the first quarter of 2020, just above R14. To the upside, the 50% area of the weekly Fibonacci fan might be a dynamic resistance over the next few weeks unless again there’s a notable shift in sentiment on either currency.

Technical analysis of USDZAR: summary


Overall the technical picture remains pretty negative for dollar-rand, so more losses might be expected over the next few weeks. Conversely, pairs with the rand are notorious for their volatility and unpredictability given the speed with which sentiment can change. 

The critical release for dollar-rand on Friday 26 February is South African balance of trade for January at noon GMT. The consensus at the time of writing is about R15.2 billion against December’s R32 billion. Other key releases tomorrow are American personal income and personal spending. Next week’s NFP is likely to bring high activity for most CFDs including USDZAR: for a fuller preview of this most important release, please join us again next week.

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