The South African rand strengthened a bit against the US dollar on Friday, as we are now in that area I was recently talking about. The 15.50 rand area is an area in which I expect to see a certain amount of interest, because it was so important as far as resistance was concerned previously. “Market memory” should dictate that there will be buyers in this area, so we will have to wait and see whether or not we get a bit of a bounce that we can take advantage of.
Keep in mind that part of the reason the US dollar spiked so significantly against the South African rand was due to the omicron panic, and worries that South Africa was going to have to shut itself down. It is becoming increasingly obvious that they do not have to, and that omicron is going to be a much more mild version of the virus to begin with. This is what viruses do, they mutate into more contagious versions, but less virulent.
At this point, if we can turn around and take out the top of the candlestick for the Friday session, then I am going to be a buyer of the US dollar and aim for the 16 rand level. On the other hand, if we break down below the 15.40 rand level, then I think we could drop down towards the 200 day EMA which is currently sitting at the 15.06 rand area and rising. The pair will be very thin over the next couple of days as it is between Christmas and New Year’s, so you need to be very cautious with your position size. That being said, this does not necessarily mean that you cannot trade, just that you need to do so with a small position and only build up once it starts to prove itself to you. We will get our real move in January, once we get more volume coming back into the workplace from traders around the world. This recent slump probably has a lot to do with people taking profits heading into the holidays so that they can report them to clients. Keep in mind that the US dollar is considered to be a safety currency, and that the South African rand is a proxy for Africa in general.
