USD/ZAR Forecast: Pullbacks Will Bring Buyers - 12 August 2019

Christopher Lewis

The US dollar rallied a bit during the trading session on Friday as we broke above the top of the shooting star that formed on Thursday. That’s a very bullish sign, and as a result it’s very likely that we are ready to go higher. The 15 Rand level was significant from a psychological and structural standpoint, and the fact that we broke above there is a very good sign for the US dollar. We are a bit parabolic though, so keep that in mind. Looking at the chart, I believe that a pullback probably attracts more traders, either those who are looking to go long and have missed the trade, or those who simply are trying to get out with a small loss as they tried to short based upon the shooting star.

As we did not break down below the bottom of the shooting star technically the cell signal never happened, but I know a lot of people will try to anticipate that based upon not only the candlestick formation but the fact that we are at a large, round, psychologically significant figure. Under many circumstances that will work but at this point in time it’s very unlikely that a lot of people were patient enough to avoid this trouble. This is why I think a pullback towards the 15 Rand level will probably bring in a lot of buyers, trying to reverse some type of short position.

Looking at the chart, the 50 day EMA is starting to curb higher, and reaching towards the 14.50 Rand level. This is an area that will of course offer a lot of interest, so I think that the market has plenty of reasons to go higher on a pullback. Beyond that, there is a severe US dollars shortage around the world and therefore there will be high demand for those greenbacks. Furthermore, we have a lot of concerns when it comes to the global growth story, so therefore it makes sense that emerging market currencies continue to fail. At this point, I believe you should be looking at any pullback as a potential buying opportunity in this pair, as the US dollar will almost certainly be stronger than most of these EM currencies, just as it has been against some of the more developed nations. I have no interest in shorting at this point.

USDZAR

About the Author
Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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