ECB rate decision and US NFPs awaits the ailing rand

Since my previous idea on the ZAR the SA budget speech ended in shambles after a failed attempt to increase VAT for 15% to 17% and the latest SA CPI figure crept higher to 3.2% in January. In terms of international relations, the vibe between the US and SA has continued sour which also does not bode well for the ailing rand.

The above-mentioned factors strengthened the support rate at 18.30 and the pair has climbed back above the 50-day MA at 18.59. A host of strong data prints from the US and a bounce in the DXY also did not do the rand any favors at the back end of last week.

The headlining events for this week is the ECB interest rate meeting and the NFPs for February. Market expectations are for the ECB to cut rates from 2.9% to 2.65%. The ECB has held a more dovish stance than the Fed since the rate cutting cycle began and if it’s more of the same on Thursday, I expect the DXY to find strong footing which will not be rand positive. Additionally, a strong NFP print will also support a stronger dollar.

Technically the pair does seem to be overbought on shorter timeframes however on the daily the RSI does have room to move higher which could allow the rand to slip further towards the psychological resistance at 19.00 if the above-mentioned events play out against the rand’s favor. A failed break below the 50-day MA will be the first indicator that the rand’s early year recovery has hit the wall, paving the way for a re-test of 19.00.