RAND ANALYSIS
- Russia withdraws troops from border.
- SA related commodities weigh on rand.
ZAR FUNDAMENTAL BACKDROP
The rand[1] has been at the mercy of US data (dollar[2]) and geopolitical risk of recent as sentiment fluctuates almost daily between ‘risk on’ and ‘risk off’ modes. Today was no different after Russian troops were announced to be retreating from the Ukrainian border giving added impetus to higher yielding emerging market (EM) currencies like the rand.
Gains have been limited by falling rand-linked commodities[3] particularly iron ore which has come under pressure today on the back of Chinese authorities comments around price scrutiny. Spot gold[4] and platinum has followed suit capping rand gains.
ECONOMIC CALENDAR
With today’s economic calendar relatively light, South African inflation[5] data and FOMC[6] minutes are in focus for tomorrow (see calendar below).
SA CPI is expected to come in lower which could bring in dovish force ahead of the next SARB rate announcement while investors are looking to the FOMC minutes for some guidance especially after recent ultra-hawkish[7] comments from the Fed[8]’s Bullard.
Source: DailyFX economic calendar[9]
TECHNICAL ANALYSIS
Chart prepared by Warren Venketas[11], IG
Todays daily USD[12]/ZAR candle already reflects the large price action[13] swings echoing today’s geopolitical events. After a swift push down towards the psychological 15.0000 support zone, markets have pushed higher leaving behind a lower long wick[14] which could suggest subsequent upside should the daily close reflect the current candle.
Bullish divergence still holds as shown via the Relative Strength Index (RSI)[15] readings (green)
