The South African rand, and other exotics, find themselves on the back foot on Wednesday ahead of the FOMC release.
USD/ZAR
The US dollar has rallied a bit during the early hours here on Wednesday as we continue to see exotics get a little soft at the moment. That does make a certain amount of sense. We have the Federal Reserve interest rate decision coming out later in the day and that will have a major influence on where we go next.
The 200-day EMA currently sits at the 17 level, and I do think that 17 will continue to be important so I will be watching that to see whether or not we have any real opportunity to break out to the upside.
Central Bank Influence and Trend Reversal
A lot of this is going to come down to Jerome Powell and his press conference, not necessarily any decision, but if the central bank in America remains somewhat hawkish that could spook the markets. That could have people running towards the dollar despite the fact that South Africa still offers more interest on its overnight rates.
So, a little bit of a push pull area. I suspect we probably will continue to see 17 offer a bit of a short-term ceiling but again if we break above there then things get interesting. At that point in time, you have to question the entire trend. We have been in a downtrend for quite a while and in a lot of the exotic currency pairs we had bottomed out on an area that had previously been supported multiple years ago, so they do tend to move in the same general direction.
We will just have to see how this plays out. Keep in mind that the United States dollar could gain against the South African rand mainly due to the fact that there is a bit of a safety bid and of course South Africa will have issues with energy right along with many others of the smaller nations out there.