The South African Rand broke the critical 16.50000 support yesterday and has sustained its value beneath the important mark. The question speculators need to answer now is if the USD/ZAR has more firepower in its arsenal to finally break through a critical support level of 16.36000 which has held twice before, once in June and once in July before succumbing to higher reversals.
Support near the 16.36000 has been seen before in the past few months and withstood bears. Selling of the USD/ZAR has certainly seen strong surges in the mid-term, but reversals have proven profitable for traders who have been willing to experiment with buying positions around these junctures. Two days ago when the USD/ZAR was testing support near the 16.55000 level, the forex pair did experience a brief reversal higher.
However, early yesterday a sudden and swift downward movement broke support and the USD/ZAR has begun to test the 16.40000 target in earnest. Traders should watch this important juncture because if the USD/ZAR continues to find downward momentum it will then be confronted by the very technically strong mark of 16.36000 which has produced bullish reversals which have been strong.
Speculators who believe the USD/ZAR has further room to move downward and maintain its bearish trend cannot be faulted, but they have a tough decision to make within the current price range the forex pair is trading. Selling within the current price action may make sense, but it can be argued that traders with limited capital to risk should wait for more momentum downward and for the 16.35000 juncture to be punctured lower. If this critical support level proves vulnerable the USD/ZAR could target the 16.25000 value and lower in a rapid manner. Limit orders, stop losses, and take profits should be used wisely within the current price levels because the forex pair could turn volatile if this critical mark is penetrated.
There is reason to believe the USD/ZAR can continue its bearish trend. Global risk appetite appears ready to remain optimistic near term. Selling the USD/ZAR makes sense from a logical standpoint and via its mid-term trend. However, from a technical perspective traders need to be ready for the possibility of quick reversals higher that could look to challenge resistance levels above.
South African Rand Short Term Outlook:
Current Resistance: 16.52000
Current Support: 16.36000
High Target: 16.64000
Low Target: 16.22000
