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The USD/ZAR price is on the cusp of a bearish breakout as investors reflect on the latest news on the Omicron variant. The pair is trading at 15.71, which is near its lowest level on December 9th. It has fallen by almost 4% from its highest level this month.
South Africa Omicron news
The South African rand has held steady against the US dollar as fears of the Omicron variant fade. A report published on Wednesday showed that the symptoms of the variant were not as strong as those of the other variants.
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While the disease was spreading fast, the number of people needing hospitalization has declined substantially in the past few days.
At the same time, the pace of infections has declined in most parts of the economy. Therefore, the South African rand has gained because the impacts of the disease are not as tough as what analysts were expecting.
Therefore, investors believe that the South African Central Bank (SARB) will continue with its hiking cycle in the coming year in a bid to curb inflation. The central bank has already delivered one hike this year.
Recent data showed that the country’s inflation has held steady in the past few months. Data by the statistics agency revealed that the country’s inflation rose to to 5.5% in November, the highest level in more than 5 years. This grows was mostly because of the prices of manufactured goods and energy prices.
Notably, the USD/ZAR pair is falling at a time when the Federal Reserve has also hinted that it will start its hiking cycle. In its decision last week, the bank decided to double its taper and then hinted that it will implement three hikes next year. Higher US hikes will make it more expensive for South Africa to service its dollar bonds.
USD/ZAR forecast
Turning to the two-hour chart, we see that the USD/ZAR pair has been under intense pressure in the past few days. The pair is hanging slightly above the key level of 15.62, which was the lowest level this week. It has moved below the 25-day and 50-day moving averages. Also, it has formed a head and shoulders pattern, which is usually a bearish sign.
Therefore, there is a possibility that the pair will keep falling as bears target the 61.8% retracement level at 15.45. This view will be invalidated if the pair rises above 15.90.
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