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.
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.
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
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
Target: 13.20, 13
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Chart courtesy of Trading View—FXCM
Disclaimer: This is not Investment advice, please do your due