The US dollar fell against the South African Rand during the session on Monday in a continuation of the massive selloff that had been kicked off a couple of weeks ago. As the political situation in South Africa stabilizes, it has people feeling a little bit more comfortable owning the Rand, and of course the inherent weakness of the greenback and recently has been very helpful as well. With that being the case, the market is likely to continue seeing downward pressure, as it looks so horrifically week.
At this point, it should be relatively self-evident that the market is trying to get down to the 14 Rand level, as the selling pressure has been nothing short of relentless. In fact, there has only been one green candlestick and the last two and half weeks, as we have plummeted from 15.33 Rand down to 14.22 Rand over the last couple of weeks. This is going to continue to be an issue, as it shows a massive amount of money flowing out of the United States and into emerging markets. Beyond that, we have most certainly broken through a major uptrend line, so that is another thing to keep in the back of your mind.
The 14 Rand level will offer a certain amount of psychological support, and it could very well cause a little bit of a bounce. Quite frankly though, if we do not hold it 14 Rand, we could fall significantly lower. At that juncture, it would represent a bit of the freefall in the greenback, perhaps seeing in other currency such as the Indian rupee, as well as Chinese Yuan, etc.
When I look at this chart, it certainly looks overdone but there is nothing on it that suggests that we are not going to continue going lower. This looks to me like a massive exodus out of safety and into risk, or at the very least a correction of the concerns after the writing that had been going on in South Africa. Rallies at this point will have to contend with the 14.50 Rand level, which is shown itself to be resistive over the last several trading sessions. Breaking above that could open up a move towards the 200 day EMA, but at this point it looks like it would be a very tall order to make that happen anytime soon.
