USD/ZAR Forecast: South African Rand Getting Hammered

Christopher Lewis

The attitude of the market has been bullish for several weeks, so look at the market as one that you can be patient with, as it will give you plenty of opportunities.

The US dollar rallied significantly against the South African rand during the trading session on Monday as we continue to see emerging market currencies get crushed. A lot of this probably will continue due to the fact that there has been a lot of pressure on the overall supply chain, so that has a major influence on what happens with some of the smaller economies out there. Quite frankly, if the global economy slows down, these Third World countries are the first one to get crushed.

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The 15.50 rand level above is a significant barrier, not only psychologically, but also structurally. If we were to break above that level, then it is likely that the US dollar continues to scream to the upside. I do recognize that the market tends to move in the 0.50 rand increments, so that is something worth paying attention to. The 15 rand level underneath continues to be supportive on any type of dip, but one thing is for sure: the market has possibly gotten a little bit ahead of itself in the short term. The 50-day EMA breaking above the 200-day EMA on the daily chart is considered to be the “golden cross”, which is a longer-term bullish signal.

The size of the candlestick is certainly worth paying attention to as well, because we have broken above a long wick from the Friday session and are closing towards the top of the overall range. I do think you can also look at this as a massive “W pattern”, although that has not necessarily kicked off quite yet. Breaking above the 15.50 rand level could open up a move towards the 16.50 rand level, which was an area of significant selling a few years ago.

If we were to turn around and break down below the 50-day EMA, then it is possible that we could break down towards the 14.50 rand level. That would obviously be a major bullish move, but this is a market that will continue to be volatile, and I think you need to look at short-term pullbacks as potential buying opportunities based upon “value.” The attitude of the market has been bullish for several weeks, so look at the market as one that you can be patient with, as it will give you plenty of opportunities.

USD/ZAR

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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