The USD/ZAR has delivered a painful reminder in January that long-term trends are not always your friend, and reversals should be expected.
The USD/ZAR has experienced a wave of choppy trading in January. After enjoying an almost relentless bearish trend previously long term, trading conditions produced a definite reversal higher, and values increased to approximately 15.65000 on the 11th of January. Since the high water mark was reached late in the second week of the month, the USD/ZAR has provided additional volatility. Speculators who believe the long-term bearish trend of the USD/ZAR may continue cannot be faulted, but it is possible their trading accounts have suffered the past few weeks.
Long term, the USD/ZAR continues to look like an attractive candidate to see its bearish momentum reignited. The fact that the Forex pair did manage a climb higher in January cannot be discounted, but from a technical perspective, it can also be construed as a cyclical reversal which happens often in Forex. Interestingly, because the USD/ZAR was able to push its way higher, the 15.00000 mark has become an intriguing support target again for speculators with a bearish perspective.
In recent trading, the 15.00000 price within the USD/ZAR was approached, but produced a reversal higher. This highlights the USD/ZAR’s ability to create a short-term battlefield in which speculators will likely be willing to wager.
The USD/ZAR appears to have been caught up in a bullish move, which hit many other currencies against the USD in January. While the South African rand certainly lost value to the USD, it has not given back a lot of its gains made since undertaking its bearish trend. In late October of 2020, the USD/ZAR was trading near the 16.48000 mark, and it would be surprising for many to see bullish momentum actually challenge this level again. Coronavirus implications in South Africa do remain troublesome for the economy, but the South African rand has proven durable since late April of 2020.
The recent surge in value of USD/ZAR should not be treated as if it didn’t happen, but speculators who have pursued bearish movements from the Forex pair may not want to give up the fight quite yet. It is reasonable to suspect that the USD/ZAR may be able to re-establish a move downwards and challenge support levels it has traversed on a regular basis since early December of 2020. The January move higher may prove to be a short-term bullish cycle technically, which runs out of steam.
Selling the USD/ZAR appears to remain an attractive speculative wager. Conservative traders may want to wait for additional reversals higher which approach the upper value band of the USD/ZAR seen in January, which technically appears to be within the 15.36000 to 15.52000 junctures. Yes, the USD/ZAR could penetrate higher resistance levels, but from a risk/reward viewpoint, the biggest potential for a solid move appears to be a speculative wager on bearish momentum reestablishing.
The USD/ZAR proved a difficult Forex pair in January, particularly for short-term traders. However, the long-term bearish trend of the Forex pair is still healthy and within shouting distance of important support which, if tested, could prove vulnerable. If the 15.00000 level is punctured lower, it could set off volatile movement downwards again.
South African Rand Outlook for February:
Speculative price range for USD/ZAR is 14.48000 to 15.73000.
Current support should be considered the 15.00000 mark, and if it is punctured lower, than the juncture of 14.86000 to 14.73000 becomes important. If the lower support ratio proves vulnerable, a retest of 14.48000 could be seen.
Resistance near the 15.47000 should be monitored; if it is penetrated higher, the USD/ZAR could challenge January highs of 15.67000. If the 15.73000 mark is approached, bearish fervor may ignite, seeking reversals lower.