USDZAR price forecast: rand consolidates ahead of inflation data

USD/ZAR – Trading View

After confirming the reversal and breaking above the 18.40 (see previous update below), the USD/ZAR traded through its initial resistance target at 18.70. The price is now trading tentatively above this level.

Traders who have been long into the move might consider exiting their trades as the price moves into a short-term consolidation.
The price consolidation comes ahead of US inflation data scheduled for 3.30pm local time. The event could trigger some short-term volatility in either direction.

From a trading perspective:
The currency pair is not yet in overbought territory, suggesting that the recent move higher is not yet overextended. New long positions might be considered on a price close above 18.85, which would suggest 19.35 to be the next upside target from the move. In this scenario (should it manifest), a close below 18.70 might be used as a stop loss consideration for the trade.

If we see a price instead close below the 18.70 level, this could trigger a short entry with 18.40 the initial downside target. In this scenario, a close above 18.85 might be used as a stop loss consideration.

USD/ZAR (previous update)

Key Takeaways:

1. The South African Rand (ZAR) is weakening against the US Dollar (USD) as the USD regains strength and rebounds from oversold conditions.
2. The lack of scheduled economic data on the day suggests that the movement in the USD/ZAR currency pair is driven by profit-taking and caution ahead of tomorrow’s address by Jerome Powell
3. Markets are assessing the likelihood of another rate hike in the US, with the Federal Reserve Chair's address expected to provide further clues.
4. The CME FedWatch Tool indicates a high probability (90.4%) that the central bank will maintain the Fed Funds Rate at the meeting.
5. The USD/ZAR price is currently showing signs of a bullish reversal from oversold territory and is testing a break above the 18.40 level.

The South African Rand (ZAR) is losing ground against the US Dollar (USD), which has begun to regain strength and rebound from near-term oversold conditions. This significant move comes on a day light in terms of scheduled economic data. In the absence of new directional drivers for the USD/ZAR currency pair on the day, there is a suggestion of profit-taking and caution ahead of Thursday, 9th November 2023.

Markets continue to assess the probability of another rate hike in the world's largest economy and will look to the Federal Reserve Chair's address for further clues. The final Federal Reserve Open Market Committee (FOMC) meeting for the year 2023 is scheduled for the 13th of December.

As of the 8th of November 2023, the CME FedWatch Tool suggests a 90.4% probability that the central bank will maintain the Fed Funds Rate in the 5.25% to 5.50% range at the meeting. This leaves a slim probability of 9.6% for a 0.25% rate hike at the meeting. The CME FedWatch Tool's probability estimates are derived and implied from the 30-day Federal Funds Futures rates.

USD/ZAR – Trading view (previous)

The USD/ZAR price has started to form a bullish reversal from oversold territory and is testing an upside break of the 18.40 level.

For long entry we would like to see the breakout confirmed with a close back above the 18.40 level. A close above this level would confirm and suggest some upward momentum from the price reversal. In this scenario18.70 and 18.85 become upside resistance targets from the move. Traders who find long entry into the breakout might consider having a stop loss at either the 18.25 or 18.15 level (depending on risk threshold).