The USD/ZAR has effectively demonstrated the ability to trade near important support junctures without suffering a sudden reversal higher. As the South African Rand trades below the 16.40000 speculators will be keen to see if the currency can sustain these values against the US Dollar and establish a new price range.
A bearish trend has been established within the USD/ZAR since mid-August and the forex pair is now testing a price range it has not seriously challenged with sustained trading since mid-March. However, when the USD/ZAR’s current price vicinity has been touched in recent trading, reversals higher have been experienced. So what makes this time different, what could sustain current price values and also produce further downward bearish momentum for the USD/ZAR?
The South African government is not a favorite among financial institutions looking for transparent governance, but it does help that the price of gold remains highly valued. These underlying contradictory statements should serve as a warning for speculators who may lean towards the belief the USD/ZAR is about to see a test of values not seen since February of 2020 and will deliver a one-way road with a bearish direction. The USD/ZAR had a price range of 14.70000 to 15.80000 in February. In early January the South African Rand had a value of nearly 14.0000 against the US Dollar.
So while I highlight the stronger values of the USD/ZAR which are certainly enticing and show that there may be legitimate more bearish capability within the forex pair, I also need to emphasize that the South African Rand can be wildly volatile on occasion. Speculators may want to continue selling the USD/ZAR, but they should note that current support levels have proven tough and consistent mid-term, June and July produced reversals higher when these current values were tested. Is this time different? Traders can still continue to pursue selling positions of the USD/ZAR, but limit orders should be used, and stop losses should be used tactically. Resistance near the 16.48000 level is fairly close, but it may prove capable as a protective stop-loss near term.
Short term there is often little correlation between the price of gold and the South African Rand. The USD/ZAR doesn’t react immediately to value changes in the precious metal. Yesterday, gold lost some value when the US Federal Reserve essentially underscored inflation will likely remain muted for the next couple of years in their opinion. This could cause some short term headwinds against gold, which may have an effect on the USD/ZAR.
South African Rand Short Term Outlook:
Current Resistance: 16.48000
Current Support: 16.30000
High Target: 16.57000
Low Target: 16.22000
