As of this writing, the USD/ZAR is near the 17.41200 level, but traders should check this stated price against current market action which has been swift in early trading this morning. One week ago when the USD/ZAR opened, the currency pair had dealt with political questions regarding the stability of the current government leadership in South Africa. This week financial houses may be reflecting on the seemingly mounting electrical outages known as ‘load-shedding’ which are plaguing the nation.
Lack of Reliable Electricity leads to Bad Production in South Africa
While traders from afar may scratch their heads and wonder why they should consider the power outages taking place in South Africa as a danger to the USD/ZAR, they should consider the consequences of prevailing behavioral sentiment. While the USD/ZAR was trading at a low of nearly 17.0900 on early Friday, the currency pair lost a lot of value before the end of the day and went into the weekend near the 5.30000 ratios. It should also be mentioned the USD/ZAR touched the 5.38500 mark at one stage on Friday. The South African government via Eskom (the national electrical agency) announced increased load-shedding again this weekend in certain regions.
While there is not a direct correlation to load shedding and the price of the USD/ZAR, there should be little doubt that the inability to deliver reliable electricity to its citizens and its factories has an effect on production. The problem of having unreliable production definitely affects behavioral sentiment in South African financial institutions, as they consider the effect on local businesses and this likely makes the USD/ZAR support levels more durable for traders.
The USD/ZAR is now testing Resistance via Higher Prices seen early Last Week
The sentiment of the USD/ZAR may remain nervous this week taking into account the heightened stages of load shedding that are occurring in South Africa. There is also a shadow being cast by the U.S Federal Reserve which will hike its interest rate this coming Wednesday by an expected addition of 0.50%.
- While resistance may look durable around the 17.43000 mark in the short-term, if nervous behavioral sentiment continues to boil in South Africa this could cause price action to become volatile and break resistance higher.
- Traders of the USD/ZAR should expect fast conditions in the USD/ZAR as it searches for equilibrium, but a wide range needs to be considered and risk management will be essential.
Speculators who believe nervous conditions will lessen and the USD/ZAR will again trade lower and test support may be proven correct. However, day trading is different than being able to hold onto a position for even a few days as wagers are made. Traders should watch the technical movement of the USD/ZAR carefully and respect the amount of nervous sentiment which may produce whipsaw movements in the currency pair today and tomorrow.
USD/ZAR Short-Term Outlook:
Current Resistance: 17.42100
Current Support: 17.33500
High Target: 17.49100
Low Target: 17.23100
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