When you look at the longer-term chart, you can clearly see that there is a significant amount of downward pressure continuing, despite the fact that we rallied over the last 48 hours.
The US dollar rallied a bit against the South African rand to reach towards the 13.70 rand level in order to show signs of life again. That being said, the market has been in a very strong downtrend for a while, so although this is a very impressive bounce over the last couple of days, the reality is that we still have plenty of selling pressure ahead that could come into the picture.
The South African rand represents Africa for most Forex traders and is a major emerging market currency. As the ZAR goes, so does many of the other emerging market currencies that we follow here at DailyForex, as it is a currency that is heavily sensitive to growth and potential inflationary problems. We are bouncing from a rather important level on the monthly charts as well, so it is very significant that we have in fact bounced from there. You could make the same argument about other commodity currencies against the US dollar, with the first one coming to mind the USD/CAD pair.
As we head into the Thursday session, all eyes will be on the Consumer Price Index announcements out of the United States in order to get a gauge on inflation. Part of what we are seen during the day on Wednesday may have something to do with short covering and the greenback, but by the end of the day we should have a much truer read on how markets are going to behave for the next move. To the upside, if we were to continue rallying, the 14 rand level will almost certainly be coinciding with the 50-day EMA crossing. After that, then we have the 14.50 rand level which was previous support and should now be resistance.
To the downside, if we can break down below the 13 rand level, that would be a major breach of support and could open up massive selling. Before we even get there though, I think the 13.50 rand level being broken to the downside would probably open up fresh selling and another attempt to break this market down. When you look at the longer-term chart, you can clearly see that there is a significant amount of downward pressure continuing, despite the fact that we rallied over the last 48 hours.