The US dollar initially tried to rally on Thursday but gave back gains to form a bit of an inverted hammer. That being said, there is a significant amount of support just below at the 15.50 Rand level, especially now that the 50 day EMA is right at the same region. The 15.50 Rand level was a major resistance barrier multiple times in the past, so pulling back to retest the area makes a lot of sense. Ultimately, I think a little bit more weakness might be ahead, and then I will be looking for some type of turnaround or stability to start buying into it.
Part of the reason the US dollar got such a boost against the South African Rand was the omicron variant, and concerns that the South African strain was going to become something quite ominous. Since then, the world has learned that this variant, although much more contagious, is not necessarily much more dangerous. The market looks as if it has a little bit of negativity left in it, but considering that it will be Christmas eve it should not be a huge surprise to see that we do very little. It is probably sometime next week that we start to turn back around, if not the first week of January.
That being said, if we break down below 15.40 Rand, then we could go looking towards the 200 day EMA which is just above the 15 Rand level. Keep in mind that this market does tend to be very choppy, but it will give you longer-term moves if you are willing to sit through all of that choppy behavior. Ultimately, a revisit to the 16 Rand level is what I am expecting, probably sometime early next month.
The market breaking down below the 200 day EMA would obviously change the overall direction, and it could send the dollar down to 14 Rand over the longer term. This is somewhat possible, due to the fact that the South African variant of coronavirus has not been as deadly as people had feared. However, there are a lot of other things going on around the world that can work against emerging market currencies, so you cannot be flippant and just assume that this is all about the virus. The lack of liquidity for the next several sessions will make this a very interesting place to say the least.
