USD/ZAR Price Analysis: ZAR Firm as USD Falter after Weak NFP

Latest USD and ZAR Currency News

For the better part of last week, the greenback was roaring. Backed with aggressive short-term buyers, the USD was marauding. However, cracks began to form late last week. With a strengthening Yen benefiting from improving household expenditure—up an amazing two percent from 0.1 percent in a year over year basis and positions unwinding—annualized GDP readings were revised higher from 1.5 percent to 1.9 percent, USD gains were quickly reversed thanks to disappointing NFP readings. Many expected a higher reading, above the approximates that analysts had placed at 180k.

Read: What Does Being a FX Trader Really Entail?

Instead, what was announced was a drop and a printout at 20k. That was one of the lowest reading last registered in Sep 2017. It could get worse in coming days. And it all has to do with Trump’s assessment of the greenback saying a stronger USD will damage business prospects.

Therefore, as Mar 20 nears, it is more than likely that the FED under the hawkish Jerome Powell will slow down on interest rate hiking, adopt a dovish stance and compound USD losses as interest flow back to currencies of emerging economies as ZAR and MXN.

Also Read: USD/ZAR Price Analysis: A US-China Trade Deal Will Trigger ZAR Demand

Even so, we can only anticipate a recovery as the USD par losses now that there has been a diffusion of tension thanks to the postponement of the dreaded Mar 1 deadline where it was expected that Chinese exports would be subjected to heavy tariffs by the US. Obviously, it did cool nerves in volatile, emerging economies, helping their respective currencies strengthen as questions about the general strength of the US economy continue to linger.

USD/ZAR Price Analysis

At the time of press, the ZAR was firm and likely to bounce off from its two months low against the green back. Although we cannot wish away the risks associated with domestic factors as what Eskom bailout means to the possibility of a downgrade by Moody’s, technical candlestick formation points to a recovering economy and a strengthening ZAR.

A single glance at our chart points to an over-valuation, coinciding with last Friday’s weak NFP reading. From historical arrangement, any close above or below the upper or lower BB reveals a weak underbelly and often time, a correction is inevitable.

Since we have a whole bull bar above the upper BB and coupled with our previous USD/ZAR stance that bears are in control, aggressive traders can take this opportunity to unwind their USD longs. After that, every high should be a selling opportunity with fitting stops at 14.60, our immediate resistance and buy trigger line.

On the other hand, risk-averse or conservative type of traders can wait for a complete reversal of Mar 7 gains meaning any drop below our immediate support and sell trigger line at 14.15 would be a perfect liquidation opportunity concluding that the break and close above the main resistance trend line between Mar 4 and 8 is a fake bull breakout.

In line of the above, our USDZAR trade plan will be as follows:

Sell: Spot, 14.15

Stop: 14.20

Target: 13.20, 13

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Chart courtesy of Trading View—FXCM

Disclaimer: This is not Investment advice, please do your due diligence.