USD/ZAR: Middle Ground Result of Doubts and Troubled Outlook

The USD/ZAR is near the 17.23300 mark as of this writing as the currency pair traverses a rather tight trading range.  As financial houses react to concerns regarding South African domestic problems such as electrical outages caused by ‘load shedding’ and questions regarding institutionalized corruption, the USD/ZAR has produced a consolidated range not only in the past week but over the past month.

While many other major currencies have gotten stronger against the USD in the past month, this has not been the case for the South African Rand. The short-term trading range has produced a rather intriguing opportunity for speculators who want to wager on the USD/ZAR via the rather narrow support and resistance levels the Forex pair is producing.

However, traders must understand that volatility can certainly break out in the USD/ZAR and what appears to be a tight range that is polite can turn into a fast-moving bet that causes violent results within trading accounts. Last Thursday did see the USD/ZAR sink to nearly the 17.01350 ratio, before reversing higher and coming within sight of the 17.27925 vicinities.

U.S Federal Reserve will Provide Impetus for the USD/ZAR this Week

While the USD/ZAR has displayed the ability to stay above the 17.00000 barriers for about ten trading days, traders who believe the currency pair is overbought currently may be proven right in the near term. The USD/ZAR certainly has not mirrored other major currency pairs, but if a three-month chart is looked upon the trend has actually been bearish.

The question for traders regarding the potential depths the USD/ZAR can hit as South Africa deals with so many domestic issues that affect the economy remains important. The U.S. Federal Reserve will likely hike its interest rate by a quarter of a point on Wednesday, but the U.S. central bank might also express a desire to become less aggressive regarding future rate increases.

Selling Highs and Aiming for Support in the USD/ZAR

• Resistance may be the most important factor for short-term traders who remain slightly bearish regarding the USD/ZAR.
• The 17.24000 to 17.28000 ratios above should be watched, if they prove durable as resistance in the USD/ZAR this may be an area to start considering selling positions while targeting support.
• Traders are urged not to be overly ambitious in the USD/ZAR in the near term.
• The chance for volatility is strong, but from a risk-reward perspective shorting the currency pair after moves higher than test resistance may be worthwhile using cautious risk-taking tactics.                                                                                          

USD/ZAR Short-Term Outlook:

Current Resistance: 17.24010

Current Support: 17.15500

High Target: 17.28430

Low Target: 17.02010