Gold pulls back from over two-month high amid rising oil, caution ahead of CPI
The Technicals
After what appears to have been a false break of the R12.85/$ level, the rand has resumed is short term weakness against the US Dollar and is now finding resistance at the R13.15 level. Circled blue we see the false break of the R12.85/$ level which took the form of a morning star candle pattern. The candle pattern suggests the end to the recent move lower and possible change in near term direction, which appears to have started already. The reversal pattern was supported by a strong move out of oversold territory by the Stochastic.
The broader picture for the currency pair suggests a sideways market. The reversal off support has already occurred (circled blue) as mentioned earlier. To unlock further gains for the USD/ZAR pair, a break of the R13.15/$ level is needed, which could open up a move back to the R13.50/$ mark.
The news
The weakening of the rand over the last few days has been catalysed by a resurgence in the dollar rather than by domestic catalysts. The US dollar has strengthened (against most currencies) as the region finds some short term reprieve from geo-political tensions and inclement weather fears.
Possible directional Catalysts
Catalysts for the remainder of the week to watch in relation to the USD/ZAR currency pair are as follows:
Thursday - The South African Reserve Bank (SARB) will release the quarterly market bulletin where market will be most concerned with the regions current account is fairing as a percentage of Gross Domestic Product (previously -2.1%). Thursday will also see CPI Inflation data and Weekly Employment data out of the US.
Friday – Markets will look to Core retail and retail sales data out of the US as potential directional catalysts for the market.
first appeared on IG.com
