The past month of trading within the EUR/ZAR has seen a strong bearish trend develop. In early trading this morning the South African Rand was testing support levels which have not been effectively traversed since the last week of July. Support near the 19.55000 juncture could prove crucial and if it is broken lower the South African Rand could find itself battling a range between the 19.25000 to 19.44000 range soon after.
However, to accomplish this lower bearish range the EUR would have to see accumulated selling in a marketplace that may prove difficult to see sustained momentum produced today. The US is celebrating Labor Day today and new traders may ask why that is important when it is the Single Currency of Europe and the South African Rand we are discussing. The reason is that with many American financial institutions sitting on the sidelines there will be a lack of big volume in the global markets today. Adding to that notion is the rather violent trading that took place on Thursday and Friday in the US equity indices, which will have market participants nervous about tomorrow’s potential trading storms.
This essentially means the EUR/ZAR may see limited trading today as institutions take a wait and see approach as they seek clarity and direction. The lack of big volume in the forex markets today sets the table nicely for currency pairs like the EUR/ZAR which may see a rather narrow trading range dominate today’s price action with sudden movements. Speculators may want to try and take advantage of sudden spikes which can emerge in low volume markets and seek reversals.
Traders need to be keenly aware in forex markets that are actively trading when a lack of big volumes exist, that forex can be susceptible to sudden gyrations which can cause unexplained spikes and then quick reversals and additional retracements without a lot of explanation. Current price action this morning in the EUR/ZAR has produced a short term spike upwards already and the 19.8000 suddenly emerges as short term resistance.
The spike upwards may prove tempting to speculators who believe a retracement will emerge too and take the EUR/ZAR back to support levels that were near the 19.61000 level only moments before. Speculators should use stop losses today to protect themselves against the possibility of spikes, but they should place them far away enough to allow the market to gyrate and then for the potential of reversals occur as the EUR/ZAR likely seeks to keep an equilibrium today until full market volumes return tomorrow. Do not be surprised by sudden fast spikes followed by extremely quiet trading conditions today.
South African Rand Short Term Outlook:
Current Resistance: 19.80000
Current Support: 19.55000
High Target: 19.90000
Low Target: 19.45000
