USD/ZAR: Volatility & Havoc for Traders

Robert Petrucci

As gold moves within the vicinity of record highs, the USD/ZAR has taken a volatile turn and developed a dangerous bullish trend.

The short term has likely proven destructive for many speculators within the South African Rand. As gold continues to push towards record highs and sustains its very high values, the USD/ZAR has become a hurricane of volatility and developed a strong bullish trend which has likely caused many traders to take losses if they were on the wrong side of the momentum.

The USD/ZAR has seen strong buying develop again this morning after testing support levels earlier. After producing a solid amount of trading late in July near vital support levels the South African Rand has produced a short term sustained bullish trend which has not only been sudden but has also vanquished resistance levels easily. Yesterday’s trading smashed through resistance levels with volatile capabilities.

Speculators of the USD/ZAR should be hyper-alert today and use risk management wisely.  Current resistance levels for the forex pair technically look to be around the 17.3500 level and a higher target which seemingly looks safe is the 17.5000 juncture. However, yesterday’s resistance levels were proven weak as buying was strong and caused losses for short-sellers. Speculators will certainly ask themselves justifiably how long this short term buying spree can continue as long as the value of gold remains near highs.

South Africa’s economy is certainly going to produce negative numbers and its outlook will be challenging to express positive sentiment even for optimistic analysts. However, the USD/ZAR does not trade in a vacuum and the value of the US Dollar continues to exhibit weakness in forex against many major currencies. This recent surge of bullish behavior in the USD/ZAR needs to be examined closely, while also admitting the market is never wrong.

So do you continue to try and sell the USD/ZAR? If you are able to use stop losses effectively and manage the amount of leverage you are using to undertake your positions, the answer actually maybe yes. In the middle of July, the USD/ZAR did trade near the 17.5000 level before a strong bearish trend developed. Can the same scenario develop within the current range of values? If a trader can place a limit sell order above the current market value of the USD/ZAR now may be an opportunity to test speculative perceptions short term.

The USD/ZAR may be overbought if it approaches the 17.3000 to 17.4000 junctures. If bullish momentum runs out of steam within these price vicinities, the USD/ZAR looks like it has the potential to reverse lower and begin to test support levels sooner rather than later.   

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South African Rand Short Term Outlook:

Current Resistance: 17.35000

Current Support: 17.10000

High Target: 17.50000

Low Target: 16.90000

USD/ZAR

Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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