USD/ZAR At New 14-Month Lows As Fed Douses Rate Increase Talk

Summary:

The Fed's moves to douse speculations that it would raise rates early, as well as improved retails sales figures in SA, send the USD/ZAR to 14-month lows.

The USD/ZAR touched off 14-month lows as a combination of the positive retail sales data and the Fed’s moves to quash talk of early rate increases boosted demand for the South African Rand.

This Thursday, the US Dollar dropped to near 4-week lows against some of the currency majors, as long-term Treasury yields dropped following moves by the Fed to dismiss early rate hikes. Several FOMC board members have been speaking this week, and all have been unanimous that interest rates were likely to stay low for some time. This has drummed up carry trades, with investment capital preferring the higher-yielding Rand to the lower-yielding greenback.

Also boosting sentiment on the Rand was the improved retail sales figure, which showed the first increase in nearly a year as it went from -3.7% in January to 2.3% in February. This figure beat market forecasts of -1.8%.

Consequently, the USD/ZAR is down 1.03% as it heads to its 4th straight day of losses.

Technical Levels to Watch

There has been an intraday violation of the 14.27441 support (23 January low) with today’s decline. However, the breakdown of this level needs to be confirmed. Confirmation via the time/price filters opens the door for the bears to push on towards 14.10676. Below this level, the 2 January 2020 low at 13.92454 comes into the picture as an additional target to the south.

On the other hand, a bounce from the current support allows the USD/ZAR to push up to 14.37645, with 14.50036 (18 December 2020 and 5 January lows) and 14.70445 lining up as potential upside targets.