USD/ZAR once again faced rejection near the trendline resistance this week, hence continuing the downward slope channel on the daily chart. The sentiment remains bullish as far as the falling slope is intact, a bullish breakout will trigger a major buying interest, validating further rallies above the 11.000 resistance area.
As of this writing, the pair is being traded near 10.4970. A hurdle may be seen around 10.5992, the 23.6% fib level and then the channel resistance which is currently sitting in near 10.6154. A break and daily closing above the upper trendline will expose the 11.000 handle.
On the downside, the pair is expected to find a support near 10.3596, the swing low of the previous wave and 200 Simple Moving Average (SMA) on the daily as demonstrated in the above chart. Big moves are not expected as far as the price holds off the downward slope channel.
South Africa Manufacturing
Markit Economics is due to release the Manufacturing Purchasing Managers Index (PMI) today. According to the average forecast of different economists, the manufacturing activity in South Africa rose slightly to 50.32 points in April as compared to 50.30 points in the month before, better than expected actual outcome will be seen as bearish for USD/ZAR and vice versa.
The Statistics South Africa is scheduled to release the unemployment figure on Monday. According to the average forecast of different analysts, the rate of unemployment in South Africa rose by 24.2% last month as compared to 24.1% in the month before, higher than expected actual reading will be considered bullish for USD/ZAR and vice versa.
Foreign Exchange Reserves
The South African Reserve Bank is due to release the foreign exchange reserves report on Thursday. The foreign reserves were seen standing around $49.45 billion in March, an increase in the foreign reserves during April will be considered positive for the economy and local currency, consequently increasing selling pressure in the USD/ZAR.
US Monetary Policy
On Wednesday, the Federal Reserve kept the benchmark interest rate unchanged in line with the projection of economists. The central bank however announced another cut in the stimulus by $10 billion to $45 billion a month, inciting bullish momentum in the price of USD/ZAR. The same bullish trend might continue next week, threatening the long term trendline resistance.
There can be a number of ideas to trade the USD/ZAR. First, consider buying on dips around the channel support (lower trendline), placing the stop just below the lower channel. Secondly, buy if the price gives a daily close above the trendline resistance (upper trendline), the stop should be placed just below the upper trendline in this case. The target for both the trades should be above the 11.0000 handle.
To contact the writer of this story: Usman Ahmed at firstname.lastname@example.org