The USD/ZAR has once again proven that its trading range can produce reversals when important support levels have been activated and risk appetite decreases. Since trading near lower values around the 16.10000 juncture on the 18th of September the South African Rand has seen a wave of bullish momentum develop and it is now trading within sight of the important 17.0000 resistance juncture.
Global risk appetite has diminished the past few trading days in equity indices and the price of gold has tumbled further. The precious metal may be suffering a short term decline on the notion expressed from the US Federal Reserve that inflation remains rather muted, but whether that is a true correlation is hard to justify and quantify. The USD/ZAR has enjoyed a rather strong bearish trend since the 10th of August, but the past three days have proven difficult for speculators selling the forex pair.
Resistance around the 17.0000 price level must be watched carefully within the USD/ZAR. In late August, the South African Rand was trading near the 17.1000 mark against the US Dollar. The 17.00000 level has been tested also in September a few times as resistance. Since yesterday the USD/ZAR has been battling resistance and it must be noted that upon the 16.98000 mark being touched a short and violent selling downward surge did breakout which brought the forex pair towards the 16.58000 level.
However, after hitting the lower value of 16.58000 on Tuesday, the USD/ZAR has seen a consistent move upwards which now has it trading dangerously close to the 17.0000. This level is looked at as a key inflection point for the South African Dollar psychologically. Global risk appetite is certainly cautious as of this morning and this is not helping to build selling momentum within the USD/ZAR either.
The bearish trend of the USD/ZAR should not be discarded by speculators quite yet. The USD/ZAR has seen its current price range tested before in September and resistance has managed to work. The short term battle within the forex pair should be watched carefully and it will be prudent to use stop losses if selling the USD/ZAR remains the trade of choice. However, traders looking for some additional bullish momentum to be created and a test of the 17.10000 level above, may also want to test the waters with a speculative trade.
South African Rand Short Term Outlook:
Current Resistance: 17.02000
Current Support: 16.87000
High Target: 17.12000
Low Target: 16.75000
