1Q2025 update

The ABC corrective pattern that I predicted in my previous idea, USDZAR 1Q2025 outlook, has played out after what has been a turbulent month of January. The DXY started rolling over in mid-January which allowed the rand some room to pull the pair to a low of 18.30. The support of the 50-day MA, currently at 18.40, which coincides with the top of the 3rd wave in the chart, however halted the rand’s early year run.

I haven’t added much to the chart since my previous idea except of the red resistance range and the Fibo retracement from the rand’s December slide. The pair is currently at an inflection point and in my first idea I predicted another 5-wave impulse higher towards 19.35, and possibly higher towards 19.50. For now, the critical support level which will invalidate this initial prediction is the 50-day MA and a break below this level will allow the rand to test the 200-day MA at 18.15 and the psychological support of 18.00. To the top side, a break above the red resistance range between 18.85 and 18.90 will be an early indication of more rand losses in the 1Q2025.

Technically the pair is still trading in an upward channel and the golden cross of the 50-day MA above the 200-day MA does not bode well for the rand. Additionally, the RSI also has room to climb higher. Zooming out (I’ll add a weekly candle chart in the comments) the pair is knocking on the door of breaking above the downward channel that’s been in place since June 2023.

The fundamental side of the coin is a lot murkier than the technical, as usual I guess. SA’s GNU is not producing much green shoots and the post-election optimism has all but faded. One positive for the rand is the fact that SA has been able to keep the lights as we recently recorded 10 straight months without load-shedding but apart from this there is not much fundamentally to be optimistic about on the local front. The interest rate decisions this week also does not bode well for the rand with the Fed opting to pause rates at 4.50% while the SARB cut rates by 25 bps.

There are still many uncertainties about Trump’s policies and how aggressive his stance will be towards SA but rest assured, it’s going to be a volatile 1Q.