The US dollar rallied again on Monday to reach towards the 14.75 rand level, an area that has been tested previously, as we formed a handful of shooting stars in that region. The 200-day EMA is sitting just above where we are right now, and the fact that we had previously been in a massive downtrend suggests that we are trying to change everything. This makes sense considering that the South African economy is a bit of a mess, and there had previously been a lot of violence in the streets.
When you look at the technicals, we had broken above the 50-day EMA a couple of months ago, and now have used the 50-day EMA for support ever since then. As long as that is going to continue to be the case, it is likely that we would see a certain amount of buying pressure as well. We are currently between the 50-day EMA and the 200-day EMA, so it does make sense that we are essentially “squeezing” in this market right now. The shooting stars just above would be something to pay attention to, especially as they signify that the 15 rand region is going to be difficult to overcome.
That being said, if we can break above the top of the shooting stars, then it is likely that the market could go looking towards the 15.50 rand level, and even further due to the fact that it would be a significant attempt to continue to turn the overall trend and go much higher. Keep in mind that the US dollar is getting a bit of a boost due to the fact that the interest rates in the United States continue to rise. If that continues going forward, then obviously the US dollar will become much more attractive. This will also be bullish for the market if we continue to see concerns about the overall reopening trade, as South Africa is an emerging market, and emerging market currencies are starting to show signs of trouble. Once you marry that with the internal problems in South Africa, I think it is more likely than not that we will eventually see a move higher unless something changes quite drastically.
