USDZAR end of Q1The rand has held up resiliently against the dollar during this recent patch of geopolitical tension largely due the rise in commodity prices, particularly precious metals. Risk-assets, such as equities and the rand, received strong bids following the Fed rate hike and going forward I don't see the rand depreciating rapidly from further Fed rate hikes as the year progresses. While we're on the topic of interest rates, I believe hikes are priced in and the rand's carry trade appeal is still very strong (SA 10-year yield = 9.785% vs US = 2.388%).
SA's trade balance surplus has however slipped from R29 billion in December to R3.55 billion in January and the forecast for February is expected to climb higher to R16.50 billion which is fundamentally rand positive.
Let's get techi:
The rand has pulled back 50% of its 2H2021 losses and the 50% fibo rate of 14.79 is the next support rate to watch (just a reminder I use a log scale chart and my Fibo retracements are also based on the log scale). A break below 14.79 will open the gates for a move lower towards the 61.8% Fibo retracement at 14.45 and the 23.6% Fibo retracement from the rand's 2020 recovery. I do however expect the rand to give back a bit and for the support at 14.79 to hold some strength. The RSI seems to be losing some downward momentum and the stochastic indicator is currently trading deep in the oversold zone (rand overbought). A pullback towards the 50-day MA of 15.20 and the 200-day MA of 15.05 is looking plausible but I expect the critical resistance rate of 15.15 to hold its ground. A failed break back above 15.15 will leave the window open for further rand strength. A break above 15.15 will however see the rand slip to 15.40 against the dollar.
There is also a looming death cross on the pair (50-day MA crossing below the 200-day MA) which will be rand positive.
To summarise, I see the pair moving into the zone between 14.35 and 14.60 as Q2 progresses.
