The US Dollar has hit three day highs against the South African Rand during the European morning session, as traders look to the upcoming data out of the US.
The gains come off the back of a volatile couple of days for emerging markets. The USDZAR fell into Thursday’s open, as a result of Fed Chair Janet Yellen’s dampening of near term interest rate hike expectations through the dovish FOMC meeting minutes. As the day matured, the pair carved out something of a range, with resistance at 10.480 and support at 10.413.
Despite a raft of positive data on Thursday – including import price index (MoM), reported at 0.6% versus a forecast of 0.2%; initial jobless claims, reported at 300K versus a forecast of 320K; and the Federal budget balance, reported at -36.9B versus a forecast -78.0B – the USDZAR once again fell to fresh weekly lows at 10.358.
The data took hold on Friday however, and the pair has regained all of its recent losses and broke through support at 10.515 to log fresh three-day highs. What’s next?
A purely technical bias suggests there will be further upside in the pair. The pair is now above its 200-period SMA and the bulls look to be in control. A close above 10.515 would validate the upside technical bias, and offer up 10.573 – weekly highs – as an initial long target.
Keep in mind that a few major releases out of the US have the potential to reverse this bias. The first of these is the core PPI (MoM) release, forecast at 0.2% versus a previous release of -0.2%. Next up is the raw all encompassing PPI (MoM) figure, forecast at 0.1% versus a previous release of -0.1%. Finally, the University of Michigan will report its latest surveys – consumer expectations and consumer sentiment. The surveys are forecast at 71.4 and 81.0 respectively.
A downside miss in any one of these releases could overturn the bullish technical bias and reverse the USDZAR to the downside.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com