A wave of buying in the USD/ZAR brought the pair to a resistance level yesterday near 17.3000 and then a reversal lower. Overall market sentiment globally appears fragile, but confidence has been given a short term dose of strength via a new policy statement from the US Federal Reserve late yesterday which could weaken the US Dollar slightly.
Current resistance levels of 17.2000 should be within the sights of traders as an opportunity if they believe technical resistance will remain strong around the 17.3000 to 17.4000 level. Speculators may believe more opportunity exists for an attempted selling position of the USD/ZAR. However, a breach above the resistance of 17.4000 could mean further erosion for the South African Rand short term.
Higher resistance levels for the South African Rand have not come under extreme pressure since late May and early June. Meaning overall market sentiment has shown steady signs of optimism and the recent wave of buying the USD/ZAR could prove to be short-lived and be waiting for a reversal to emerge. And the question is where a potential reversal could lead?
Current support for the USD/ZAR is not a mile away, the juncture of 17.0000 appears to be an important inflection point. If the USD/ZAR begins to see selling, support could prove fragile quickly and believers in a stronger South African Rand could aim for a target of 16.7000 short term.
The past few weeks of trading within the USD/ZAR have seen consistent trading between the 16.6000 and 17.5000 levels and there is little reason to think this is suddenly going to change. The question speculators should be asking themselves is about opportunity risk. Meaning which side of the range do they think has the greatest room for movement in the short term?
Currently, the ability to sell the USD/ZAR looks to be the more attractive speculative trade. Sellers who believe the South African Rand has room for adding value in the short term cannot be faulted if they are looking at technical charts and suspect the US Dollar has been too strong the past week.
South African Rand Short Term Outlook:
Current Resistance: 17.2000
Current Support: 17.0000
High Target: 17.3000
Low Target: 16.7000
