The USD/ZAR has powered through key support levels with ease and, as the new year approaches, the Forex pair is challenging long-term values not traded since January of 2020. The bearish trend within the Forex pair has been demonstrative, and if speculators have been wagering on reversals higher, they may have suffered significantly if stop losses were not used. The month of December has produced blistering downward momentum for the USD/ZAR and proven support levels vulnerable.
The move in the USD/ZAR has taken place with a rapid pace and traders may be wondering when the trend will pause. If the Forex pair sees support levels around the 14.53000 level stay solid, this could instigate some speculative buying within the USD/ZAR as resistance is targeted. However, the trend has been progressively bearish, and if support falters, speculators will need to look at long-term charts from a year ago and beyond to consider the next potential moves.
Technically, the USD/ZAR is traversing a value band which it practiced in the early days of growing coronavirus concerns. It was in late January of 2020 that the USD/ZAR began to incrementally rise and see a bullish trend consistently mount until a high of 19.00000 was touched in March. Before worries about coronavirus hit the South African economy and global investors, the value of the USD/ZAR was near 14.00000 in December of 2019. These numbers should give speculators plenty of contemplation.
Risk/reward scenarios seem to indicate that resistance will prove stronger than support in January. Current resistance levels of 14.90000 and above look firm. The rapid bearish trend the USD/ZAR has exhibited might be a reason to suspect that resistance levels above could prove vulnerable if they are tested, but if global risk appetite remains steady and overtly optimistic, there is a greater chance that there may be more downside price action to attain. The bearish trend of the USD/ZAR remains attractive, although speculators should not anticipate the rapid moves seen in November and December which have been achieved.
Support around the 14.48000 juncture could prove important and, if it is broken lower, this could set up an interesting test of values below. Because the USD/ZAR is now testing values seen almost one year ago, technically there is a potential vacuum effect awaiting the Forex pair if it is able to test support levels lower.
Speculators may want to continue selling the USD/ZAR and use nearby resistance levels to purse the bearish trend. It is also important to point out that traders should not become too greedy if they are able to profit from further bearish momentum. Speculators may not want to cash out of their selling positions completely. If their brokers allow traders to use trailing stops to stay in the market and pursue the trend while protecting profits, this could prove to be an effective method of trading.
Until the first week of January is complete, traders should understand that trading volumes may be rather light, which could spark sudden spikes. However, pursuing additional bearish momentum from the USD/ZAR appears to be the logical choice for speculators who believe the trend will continue to manifest during the coming month.
South African Rand Outlook for January:
- Speculative price range for USD/ZAR is 14.25000 to 15.17000.
- Support at 14.48000 is nearby and if this level becomes vulnerable a drop to 14.32000 could become the focus. If additional bearish momentum grows the 14.25 is the next target and lower values could come into play.
- Resistance near the 14.90000 may prove to be strong, if the level is punctured higher a test of 15.17000 could develop if risk adverse trading grows.
