The tight range which has developed for the USD/ZAR in the month of October may be starting to make speculators nervous. Traders have a tendency to question too much of a good thing and the South African Rand’s consolidated value may be making some people paranoid that a breakout is about to emerge which will turn technical charts upside down and create ruin. However, speculators who believe risk taking and risk management are part of the same dynamic may see the USD/ZAR as an opportunity until proven otherwise.
Trading this morning is near the 16.50000 level which is bordering critical support and has key inflection points firmly below. The 16.43000 and 16.33000 support levels have proven difficult to sustain trading below these values since June, yes the 16.33000 juncture has been punctured lower, but these values have also seen strong reversals higher produced consistently. Is this time different? And maybe more important, does it need to be for a well prepared trader?
The consolidated range of the USD/ZAR is an attractive opportunity to take advantage of momentary reversals which have happened consistently. However to take advantage of these swings a trader needs to have a remarkable amount of patience and the ability to catch the forex pair at the right time. The South African Rand is a key barometer of global risk appetite, while it might not be the most influential emerging market forex pair it does reflect sentiment rather well.
Trading outlook this morning is rather mixed as investors have shown some caution, but equity markets do remain near important highs and no violent selloffs have been exhibited short term. The price of gold is straddling a known range and its sideways trading also serves as a correlation for the South African Rand’s inability to puncture support consistently.
Traders should continue to monitor support and resistance levels with the USD/ZAR carefully and use stop losses to protect against the chance its consolidated range could unravel. However, if proper stop loss mechanisms are used, looking for upside momentum between the 16.45000 and 16.47000 levels with buying positions using limit orders may be a solid approach to the USD/ZAR’s current values as it hovers near support.
South African Rand Short Term Outlook:
Current Resistance: 16.58000
Current Support: 16.43000
High Target: 16.79100
Low Target: 16.33000
