The USDZAR is in danger zone. The pair has formed a pick topping the $10 level. Since August 25, 2013, the pair have been losing ground and it is about to turn into bearish territory.
Next week if the trend continues, it could be a confirmation that the pair has been overbought and that it will need to go into a retreat. Most probably the USDZAR will settle around the next retracements level, in-between $9.00-$8.90; before anticipating any other movement.
Today’s gains have formed a weekly Doji candlestick pattern. Which after three previous week of closing lower and lower, it could mean that USDZAR traders are not willing to risk more in any direction.
The gains have been supported by the South Africa’s government lower budget deficit forecast to 4.2 percent of GDP, from the 4.6 percent projected in February due to lower spending and technical effects from changes to how it calculates the fiscal balance. This could have kept the USDZAR under pressure for longer time.
Unfortunately, the Treasury reduced growth expectations to 2.1 percent of GDP from 2.7 percent forecast in February.
There is a good change on shorting the pair as the USD in particular is not looking like an over performer in the weeks ahead.
Thurdays and Friday will be pack with economic news coming out from the U.S. According to analyst’s expectations, the upcoming economic readings will slightly favour the USD dollar; but might not be enough to upset the downtrend course. By the end of the week and in the coming weeks, the USDZAR could weaken even further.