The USD/ZAR continues to press up against important support levels which look more vulnerable as the short term trend of the South African Rand seemingly gains incremental momentum. While the price of Gold trades near record levels the ZAR has found renewed believers and selling of the USD/ZAR has been pronounced since the middle of June. However, the shadow of coronavirus looms.
Support levels of 16.6000 and 16.5000 should be watched attentively. While some speculators may believe these junctures could serve as a good place to look for reversals upwards, traders who believe risk appetite remains strong may develop an outlook for the USD/ZAR to track lower and test support levels not seen since early March. However, it should clearly be said the last time the USD/ZAR did hit the 16.5000 mark around the 10th of June; the US Dollar suddenly developed a surge of buyers.
Coronavirus is causing havoc in South Africa. Johannesburg and Soweto, which is a township within the city, are being hit with new infections and the government has issued a curfew and trying to keep people in their homes by also decreeing a sales ban on alcohol. Economically the nation certainly has concerns regarding the ability of its citizens to work and be productive.
So is this time different for the USD/ZAR? The support levels being tested today have seen a steady and incremental trend of selling the USD/ZAR the past week. Could the selling be overdone because the value of Gold has climbed to record highs on over exuberance within the South African Rand? Speculators who respect the current trend of the forex pair will be tempted to test waters and search for lower depths. Selling the USD/ZAR at these levels should be done with stop loss orders tactically working to guard against sudden reversals. However, looking for values around the 16.5000 cannot be faulted. It comes down to a decision regarding risk appetite within each trader and the ability to quickly trade the market.
Looking at the current circumstances of South Africa and its problems with Coronavirus, it would be easy to justify seeking reversals higher too. The USD/ZAR may be a very good candidate for select limit orders testing its current range. Traders who believe the South African Rand may not be able to achieve many more gains in value against the USD in the short term, may want to enter buying positions of the USD/ZAR near the 16.6000 mark and look for reversals upwards.
South African Rand Short Term Outlook:
Current Resistance: 16.8500
Current Support: 16.6000
High Target: 16.9500
Low Target: 16.5000
