The South African rand has shown it has the ability to sustain its lower forex values against the USD short term. Trading early this morning has produced a slightly bullish rise, but this has come after strong downward pressure which resulted in the critical 15.50000 level coming into target. If the psychological mark of 15.50000 is broken lower, the next important nearby mark will be the 15.47000 level. While the USD/ZAR trades within this value range it will also be important for speculators to remember the forex pair was trading within the 16.10000 to 16.40000 price band quite comfortably the past month.
Last week’s trading broke important support levels and the USD/ZAR is now testing levels not traded since the first week of March. Worth noting is that the price action of the forex pair in early March occurred as fear rose in forex and the South African rand lost value to the USD with a ferocious bull move as coronavirus economic implications became reality.
Coronavirus has not disappeared and South Africa still faces challenges regarding the pandemic. However, the trading environment has clearly changed and investment houses have fought for equilibrium, which brings up a question comparing fundamental to technical trading. The USD/ZAR has now reached a value which is on the edge of testing prices which financial institutions may believe is overvalued.
However, a considerable amount of risk appetite may continue to be demonstrated within financial assets short term following the results of the US election. Short term speculators need to be prepared for further tests of support levels, but consider the gains made by the USD/ZAR in the wake of its bearish momentum may be viewed as too much by some. Taking into account the fiscal pratfalls which could influence South African over the next six months the USD/ZAR may be considered too bearish.
Speculators will need to consider the possibility reversals may develop. Yet the trend remains quite impressive for the USD/ZAR and short term it may prove unwise to fight against its rhythm. While the critical psychological level of 15.50000 remains alluringly close, traders may want to continue to seek its target and look for price action which punctures this support ratio and challenges values below before speculating on moves higher which may eventually develop. Near term may favor more bearish sentiment within the USD/ZAR.
South African Rand Short Term Outlook:
Current Resistance: 15.66000
Current Support: 15.47000
High Target: 15.80000
Low Target: 15.24000
