The USD/ZAR exchange rate pulled back on Wednesday as the US dollar retreated. It dropped to 16.95, down slightly from this week's high of 17.23. This retreat may continue in the near term after the pair formed a rising wedge pattern.
South African Rand Retreat May Be About to End
The USD/ZAR exchange rate has rebounded in the past few months, moving from a low of 15.62 in January to a high of 17.2 on Tuesday.
This performance happened as the US Dollar Index (DXY) rebounded to $100 amid the ongoing war in Iran that has pushed inflation higher. The war has led to a surge in petrol and diesel prices in South Africa.
The pair also jumped as gold and other precious metal prices dropped sharply. Gold has dropped from a record high of $5,585 in January to the current $4,673.
Other precious metals like platinum and palladium prices have slumped in the past few weeks, a move that will affect the South African economy. On the positive side, gold has jumped 14.40% from its lowest level last week.
Another positive is that there are signs that the war may end in the coming weeks. Donald Trump has hinted that he may abandon the war despite not achieving his key priorities, including regime change and the reopening of the Strait of Hormuz. Still, it is unclear whether Iran and Israel are ready to end the war.
The next key USD/ZAR pair will be the upcoming US jobs and retail sales data, which will come out later today. Economists expect the report to show that the private sector added 40k jobs in March after adding 63k in the previous month.
USD/ZAR Technical Analysis
The three-day chart shows that the USD/ZAR pair has rebounded in the past few weeks, moving from a low of 15.62 in January to a high of 17.23 this week.
A closer look shows that it has slowly formed a rising wedge pattern, which often leads to a strong bearish breakdown. This pattern is made up of two ascending and converging trendlines, with a retreat happening when the two lines near their confluence.
The pair has formed a bearish engulfing pattern, which is made up of a big bearish candle that follows and covers a bullish one. Therefore, the pair will likely have a bearish breakdown in the near term, potentially to the key psychological level at 16.50.