Rand dollar news: USD/ZAR falls below 17.00 ahead of Fed decision day

Risk assets ease ahead of FOMC

US stock indices S&P 500 (SPX), Nasdaq (US Tech 100) and the Dow Jones (Wall Street 30) are trading in the green after tech giants Microsoft and Alphabet released resilient earnings, easing sentiment before the FOMC rate decision later today (18:00 GMT).

With a 75-bps rate hike already priced in, the subsequent press conference will be monitored closely as Fed Chair Jerome Powell discusses the forward guidance for the trajectory ahead.

If the Fed is wiling to do ‘whatever it takes’ to combat inflation, an economic slowdown combined with higher interest rates (cost of credit) and elevated price pressures raises the prospects of a recession.

USD/ZAR technical analysis

While robust data and an aggressive Fed has supported USD strength against most major counterparts, USD/ZAR has temporarily fallen back below 17.000 after bulls failed to gain traction above the September 2020 high of 17.264 earlier this month (14 July).

Although fundamental factors will likely remain the prominent driver of sentiment, the weekly chart below highlights the manner in which Fibonacci levels from historical moves (both the 2018 – 2020 & 2021 – 2022) continue to provide support and resistance for price action.

USD/ZAR weekly chart

With the weekly CCI (commodity channel index) still hovering around overbought territory, the daily CCI has fallen back into the ‘acceptable’ range while the pair is down around 0.54% for the day. If the 2020 range remains intact, a break below 16.70 may allow for a retest of the July low at 16.234 with the next layer of support holding at the 16.00 psychological level.

However, for bullish continuation to be probable, a break above 17.00 and 17.300 would be required, opening the door for the 76.4% Fib of the 2018 – 2020 move at 17.495. If this level is cleared, the uptrend may continue, with the next level of resistance holding at 17.687 (August 2020 high).

USD/ZAR daily chart

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