overview

Global risk appetite and safe haven gold have boosted support for the Rand this week.
Lows are being tested for the Rand pairs, but now attention shifts towards next week’s budget talk and US policy as march central bank decisions approach.

The Rand has been showing off and dominating against a basket of emerging market currencies this week.
The USD/ZAR pair has been trending in a bearish trend with the Rand closing lower on 8 out of the past 10 trading days.

The US Dollar is currently softer than usual due to extremely high inflation due to Covid-19 effects, global appetite for risk and a softer than expected Fed meeting minutes.
With the US President Joe Biden heavily involved in the Russia and UK tensions, the greenback is losing strength and investors are moving away to the current safe haven of gold – pushing the commodity to 3 month highs, and providing support for the rand.

What to expect next week:
The Rand’s attention will be split between the budget speech on the 23rd of February, as well as any talk of the US Fed raising interest rates in March as players trade the rumours.
The local budget speech will have to paint a very positive economic outlook with little constraints for the rand to benefit from the talk, if the debt to growth ratio and any effects from civil unrest are evident in the speech then the rand may fluctuate weaker on the day.

Technically:
As mentioned USDZAR traded in a downward trend having recently broken below the support level of R15.00/$ yesterday.
The pair has opened consistently lower each day this week and having opened slightly under R15.00/$ shows we are poised to test R14.92/$ and R14.86/$ should the strength continue.
Breaking R14.85/$ may see a gradual long term push towards lows of R14.60/$ – R14.65/$. However, we predict that the budget speech will not be pleasing to investors and the rand might spike up significantly.

Tensions continue in certain parts of Europe, with the threat of Russia invading Ukraine in eastern Europe. The Euro is currently weaker than usual due to the pressure of these geopolitical tensions.
Reportedly, Russia has demanded that attention be brought back to cold war. Furthermore, more and more countries now blame Russia of putting the peace in Europe at risk – thus EUR seems to be faltering under the situation.

For movement on the Euro we will keep an eye on the progress of Russia’s intensions. Despite the Russians insisting that the claims on their plans to attack are baseless, they have noted that military response will be warranted if the US doesn’t agree to their demands involving the Ukraine.

Technically:
EUR/ZAR fell in the bottom end of our predicted range with the pair now finding itself at a strong support of R17.01/€.
Traders seems to be favouring the downside, and if we break R17.01/€ then R16.92/€ and R16.82/€ becomes in reach. Momentum will need to push the pair lower as there will be resistance at current levels.

UK retail sales have shown growth and is putting some pressure on households in the country. Despite inflation, which has become worldwide pandemic itself, being at it’s highest levels seen since 1992.
The Bank of England might also raise their interest rates next month, if there is failure to tame the increase of inflation in the country. The BoE has already hiked interest rates twice since last year.

Moreover, the UK has released a ‘Red’ alert as a warning of a deadly storm approaching the nation and thousands of citizens have been urged to stay home and stay safe.

Technically:
GBP/ZAR has had trouble breaking below R20.30/£, with sideways movement around R20.40/£ and much fluctuation in the R20.30’s. these are still better levels on GBPZAR than the R21’s we were seeing just last week and prior. The bias remains to the downside but with a slight chance of retracements remaining relevant.

Technical level we are watching for next week: