The past two weeks of trading within the USD/ZAR have seen a rather intriguing reaction caused by the recent unrest in South Africa’s communities. However, what may be most intriguing about the trading within the Forex pair the past two weeks is the acknowledgement that the USD/ZAR did not slip off the table and suffer a devastating bullish run higher. While the headline is intended to grab attention, the fact is that the USD/ZAR is going to start trading in August within sight of the value it began the month of July.
As trading on the 1st of July came to a close, the USD/ZAR was trading near a high of 14.48000, and as the month closed, the Forex pair has a value of about 14.58000. Obviously, this difference in value is hardly noticeable, and if you weren’t paying attention to the developing news on a daily basis in South Africa you may rightfully state that it made no difference. Score one point for technical traders and a zero for fundamental speculators. However, the real picture is more complex than the simple differential in value. Because clearly what happened in between the 1st and 30th of July while the USD/ZAAR was trading is the story which effected short-term speculative wagers.
The USD/ZAR did make a high of nearly 14.99000 on the 26th of July and this certainly happened as nervous sentiment had an effect on financial institutions. However, after hitting this high water mark, the USD/ZAR did reverse lower and a low of 14.52000 was exhibited on the 29th of July. From a technical perspective, the USD/ZAR has certainly shown that the rise to nearly 15.00000 may have been an exaggerated overbought whirlwind and the reversal to what can be describe as the middle of its range a result of calmer thinking.
As August gets set to start, the USD/ZAR has many answers which will be delivered in the coming weeks based on the results from the Forex pair’s trading; the problem is that because of the existing political situation, clear questions are not easily defined by ‘outsiders’. Since hitting a low of approximately 13.35000 on the 4th of June, the USD/ZAR has been within a clear bullish trend and it has been able to make resistance levels look vulnerable. The political and social unrest in South Africa definitely caused behavioral sentiment to become fragile and quite possibly damaged the confidence of traders who maintained the belief that a bearish cycle would start to prevail again. Interestingly, the last few days of July did see the USD/ZAR begin to correlate to other major Forex pairs as it began to reverse lower and test short-term support levels.
South African Rand Outlook for August
Speculative price range for USD/ZAR is 13.85000 to 15.15000.
The USD/ZAR should be treated cautiously in August because of the dynamic situation within South Africa politically. The ability of the Forex pair to reverse off highs and begin to challenge nearby support levels may entice speculators who believe further bearish price action will occur. However, the notion that perhaps the recent selling of the USD/ZAR may be based on too much optimism is also a consideration. Contrarian viewpoints should be listened to in the coming days and traders should monitor technical trends carefully. If support values near the 14.50000 level weakens and the USD/ZAR can effectively challenge the 14.35000 and 14.25000 junctures, it may mean the Forex pair has a legitimate chance to flirt with lower realms and perhaps test values below the 14.00000 ratio. However, for the time being, this feels like a road too far to traverse.
However, based on the questions that need to be answered in South Africa in the coming days and months, August may prove to be an opportunity for speculative bulls to buy the USD/ZAR on moves which test support levels and potentially cause reversals higher. Yes, the USD/ZAR has reversed lower in the past few days as August is about to be unleashed, but it is possible financial institutions may remain cautious about becoming massive sellers of the USD/ZAR until answers regarding solutions to the current political situation are heard in a clear manner. If a trader believes the USD/ZAR is a buying candidate on reversals lower, they should also use solid risk management to make sure they are not paying too expensive a bill if they are proven wrong.
