- The USD/ZAR initially tried to rally during the trading session on Friday but gave up gains near the 19.17 level.
- This is the same place where we had seen resistance during the previous session, so does make a certain amount of sense that we will see a lot of noise in this area.
- We are sitting just above the 50-Day EMA, which is right along the bottom of the overall previous channel. If we can break above the top of the previous 2 candlesticks, then it’s possible that the market could continue to see upward momentum.
If we do break out above the last couple of candlesticks, it’s possible that the US dollar will trade as high as 19.50 ZAR levels, which is an area where we had pulled back from previously. All things being equal, this is a market that will continue to be very noisy, and cause quite a bit of volatility. Ultimately, I think that we’ve got to look at this through the prism of risk appetite, as the US dollar course is a safety currency. Furthermore, we also have to look at the South African Rand as a gateway currency to the African continent. Furthermore, it’s also a heavily traded emerging-market currency, so ultimately, I think this is a situation where you have those dynamics coming into the picture.
Pay Attention to the Geopolitical Situation
Regardless, you’re going to have to watch the overall geopolitical situation, because that will have its influence as well. As long as there are lots of concerns out there about the escalation of geopolitical tensions, it’s possible that we have the US dollar gain in general. I do believe that a breakdown below the 18.70 level could open up a huge move lower. That opens the possibility of the US dollar trading down to the 18 Rand level, which is an obvious area of support previously. Between here and there, we also have the 200-day EMA near the 18.50 level, so there are plenty of reasons to think that even if we did break down, it would be very difficult to continue momentum-wise.
Over the next several sessions, I would not be surprised at all to see this market go back and forth, using the 50-Day EMA as a bit of an anchor point, and perhaps even an area of “fair value.”
Potential signal: If the US dollar breaks above the 19.18 level, I am a buyer of the US dollar against the South African Rand. I would have a stop loss near the 18.95 level, and a target of 19.52500 above.
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