RAND TALKING POINTS & ANALYSIS

• Will Fed remain hawkish post-NFP?
• NFP data the key to short-term directional bias for USD/ZAR.
• Rising wedge resistance being tested.

USD/ZAR FUNDAMENTAL BACKDROP

The South African rand hovers around the R19.50/$ mark after a swift selloff ensued this week with mixed US labor data being the primary driver ahead of today’s Non-Farm Payroll (NFP) release. A resilient jobs market in the US has been the principal factor causing the Federal Reserve to maintain an aggressive monetary policy stance. Although inflation has been steadily declining, the labor market has shown little signs of weakness.

Money market pricing (refer to table below) for the November Fed interest rate decision shows a 22% probability of a hike but this could be ‘hawkishly’ repriced should NFP’s surprise to the upside.

IMPLIED FED FUNDS FUTURES

Source: Refinitiv

Headline expectations (see economic calendar below) are marginally lower from the prior print but unemployment and earnings look to remain elevated thus supporting higher inflation. With no significant South African specific data scheduled, USD/ZAR will be almost solely focused on the US.

USD/ZAR ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

USD/ZAR DAILY CHART

Chart prepared by Warren Venketas, TradingView

Daily USD/ZAR price action has now pushed above the ascending triangle pattern with the 19.3000 level serving as triangle resistance – as mentioned in my previous analysis. Bears have defended the 19.5000 psychological level as hesitancy creeps in ahead of the NFP release. A decline in the US jobs market could see the pair fall back below the 19.3000 support zone and remain within the developing rising wedge pattern (dashed black line). From a bullish perspective, a strong NFP print could invalidate the rising wedge formation and close above wedge resistance, thus exposing the 20.0000 mark.

Resistance levels:

• 20.0000
• 19.9185
• 19.5000/Wedge Resistance

Support levels:

• 19.3000
• 19.0000

Contact and followWarrenon Twitter:@WVenketas