USDZAR Approaches Key Level

The USDZAR came into 2018 in a mark-down phase (red shaded area). The pair then moved into a sideways accumulation pattern (blue rectangle). Recently, it has moved into a mark-up phase (green shaded area). This phase is defined by the bullish EMA pattern where the USDZAR’s green 5-day EMA is above its orange 13-day EMA, and its orange 13-day EMA is above its black 34-day EMA. It is noted that price is approaching the red 200-day SMA, which is regarded as a key level and may very well act as resistance. If price breaks above this SMA, we are likely to see an appreciation in this pair’s price.

As things stand the US 10-yer treasury is showing relative strength to other yields and that is certainly attracting capital creating the demand for USD. The Fed release tonight at 8:00pm will be important. If it adopts a more hawkish tone, there will be further USD strength to the detriment of the ZAR. Moreover, USD is typically inversely related to commodities and especially gold. Given that the ZAR is considered a commodity currency, continued weakness in commodities will also negatively affect the ZAR.