November produced a strong amount of bearish momentum in the USD/ZAR and may raise suspicious eyebrows from speculators. The price range of the Forex pair has seemingly created a new value band which needs close inspection. As December approaches, traders will certainly wonder if the USD/ZAR has further room to demonstrate what has proven to be a generous bearish trend.
Speculators may suspect the USD/ZAR has been too dynamic and that a natural reaction will take place with the Forex pair which will produce a reversal higher. However, traders need to look at the entire Forex market and at the results from a wide selection of emerging market currencies versus the US dollar. It is clear the USD has been weaker, and this mid-term trend may have the capability to become a long-term endeavor.
The USD/ZAR is now challenging values it has not traded since late February. As coronavirus struck worldwide and caused bedlam within the financial markets, the USD/ZAR, like many other Forex pairs, saw a risk-adverse reaction and bullish buying ensue en mass. The USD/ZAR hit a high of nearly 19.08000 in the month of April and, since establishing this high water mark, has been in a constant battle to restore some semblance of value within the South African rand.
As the USD/ZAR now trades within the lower boundaries of its mid-term range and challenges support on a daily basis, traders can clearly see that the Forex pair has sustained its bearish momentum and not suffered many violent reversals upwards. If speculators believe the USD/ZAR will be able to recapture values seen just before fears of coronavirus caused widespread devastation in Forex, the pair then should have a target actually below values of 15.00000. The past month of trading has seen a strong surge of bearish momentum develop. The 16.00000 level was punctured lower around the 4th of November and has quickly brushed aside support levels that have proven extremely vulnerable.
The 15.00000 juncture will be an important psychological test for the USD/ZAR if it comes into full view. Certainly, speculators are correct to target this level if they believe more bearish selling will occur within the USD/ZAR. If trading is sustained below the 15.00000 mark it would signal that a real test of February values is about to occur. However, some traders may remain skeptical and believe the USD/ZAR has gained too much, too fast and may pursue reversals higher. If resistance attracts traders over the next few weeks, they may find that they need global markets to also become more cautious and for risk appetite to subside.
For the time being, speculative bearish positions may continue to attract the most attention from traders. Yes, the USD/ZAR has put in a sizable bearish trend already, but as long as global markets continue to demonstrate optimism, it may be wise to try and pursue the Forex pair with selling positions looking for further downside price action.
Important support levels will have to be proven vulnerable for another significant bearish move. Until then, it is reasonable to believe resistance levels may prove significant above and can be used as noteworthy ratios to look for short-term reversals lower. The USD/ZAR proves it has the ability to sustain its new value range and set its focus on early February values, which may be tested in the coming weeks.
South African Rand Outlook for December:
- Speculative price range for USD/ZAR is 14.61000 to 15.68000.
- Support at 14.96000 may prove a critical inflection area, if it is broken lower values between 14.87000 and 14.61000 could prove to be a target range for bearish sentiment in the USD/ZAR.
- Resistance near the 15.35000 could be adequate, if the juncture doesn’t hold a retest of the range 15.47000 to 15.68000 might emerge.
