- The USD/ZAR initially tried to rally during the Wednesday session, as we broke above the 50-Day EMA.
- The market tested the 17.75 Rand level, and it looks as if that has been a bit too much.
- The size of the candlestick is rather negative, and it does also suggest that perhaps there is a little bit of downward momentum.
Keep in mind that the CPI numbers came out at 7.1% year-over-year for the United States, so that of course has people betting that the Federal Reserve is going to slow down its overall monetary policy, but I think it’s a bit premature to think that. After all, it was expected to be 7.3%, so although it is 0.2% better year-over-year, it is still at extraordinarily high levels. At the end of the day, I think there is a significant amount of support just underneath, especially near the 200-Day EMA. If we were to break down below the 200-Day EMA, it’s likely that the US dollar will drop down to the 16.50 Rand level, maybe even the 16 Rand level. On the other hand, if we were to turn around a break above the 18 Rand level, then I think we will more likely than not go back to the highs again.
Waiting for the FED Meeting
Keep in mind this is a market that is highly sensitive to interest rates, but it’s also highly sensitive to risk appetite. Remember, South Africa is a massive exporter of commodities, so global growth and risk appetite come into the picture when trying to figure out whether or not there is going to be a lot of demand for the currency. In this scenario, I just don’t see how things look good over the longer term, but we will have to wait and see.
After the Federal Reserve meeting, we will have to see how the US dollar is behaving, because it does tend to move in lockstep with other currency pairs, meaning that the US dollar either goes up everywhere, or it goes down everywhere. The size of the candlestick certainly looks very negative, so a bit of follow-through may happen, but we will have to see what Jerome Howell does with his statement. The 50 basis point rate hike coming out of the Federal Reserve is already anticipated.
Ready to trade our Forex daily forecast? We’ve shortlisted the best Forex brokers in the industry for you.