The US dollar gapped lower against the South African Rand to kick off the week on Monday, reaching towards the 14.75 level. We did of course show a lot of back-and-forth choppy during the trading session as we turned around to fill the gap but have rolled over again. Ultimately, when I look at the chart the 15 South African Rand level has been massive resistance as you would expect, because quite frankly it is such a large, round, psychologically significant figure.
Beyond that, we have formed a shooting star for both Friday and now Monday, and this tells me that we will probably see more negativity. This makes a lot of sense because it is such a large number, but it’s also the measured move from the symmetrical triangle that we had formed and broken out of. Remember, we broke through it, pulled back to it, and then rally again. At this point, it’s very likely that we continue to go a little bit lower, perhaps reaching towards the 14.50 Rand level again.
The alternate scenario of course is that we turn around and rally right away, breaking above the shooting star from the Friday session. If we break above there, then it’s likely that we go to the 15.50 Rand level, and then possibly even the 15.75 Rand level. This market is more than likely going to struggle to do that though, because there are a lot of people interested in that 15 Rand area. However, it is likely that the action that the Federal Reserve has taken recently, or at least the attitude shift, should continue to work against the greenback, thereby and barring some type of financial breakdown, we may have seen the short term top.