The Federal Reserve speeds up its quantitative tightening, and this is certainly bullish news for the USD. At the same time, this is a negative factor for the American stocks, which have entered their seasonally worst month.
The insights into exotic pairs: the ZAR
The South African currency was named as one of the most volatile emerging-market currencies by some analysts and its recent behavior may prove this statement. After the bullish start of the year, the rand has started to weaken since the last Thursday. Let’s point out the main factors affecting the rand and set the key levels for this week’s trading. The key event in South Africa which pushed the USD higher against the South African currency is the rate decision by the South African Reserve bank. The central bank left its interest rate unchanged at 6.75% on Thursday and projected only one rate hike by the end of 2021. The reason behind this cautious tone is connected with the changes to the inflation outlook by the bank. The bank cut its inflation forecast for 2019 from 5.5% to 4.8%. Let’s not forget about the global market. The recent risk aversion was created after the news about the global economic slowdown. The slowdown happened as a reaction to trade uncertainties between the US and China, the news on China's low economic growth and the cut of the global growth forecast by the International Monetary Fund. What will support the ZAR this week? The economic calendar does not contain any important data for the USD this week that is why it is recommended to pay attention to the news about the trade war and comments by the leaders during the World Economic Forum in Davos.
Let’s take a look at the key levels for USD/ZAR. On the daily chart, the pair has been making gains towards the 13.98 level. If the pair manages to break the resistance, the next resistance is placed near the 50-day MA at 14.13. Despite the upward momentum, the trend is still bearish according to the Parabolic SAR. If USD/ZAR reverses, it will fall to the support at 13.8122. If this level is broken, the next support lies at 13.6640.
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