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USD/ZAR: Battle in Lower Price Range as Fed Policy Lurks

The USD/ZAR has traded within the lower elements of mid-term price range with a rather healthy dose of reversals taking place which may allure speculators.

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    The USD/ZAR as of this writing is near the 18.02100 mark as of this writing.  While it is easy to point out that 18.00000 remains a key ingredient regarding technical perspective in the short term, the reason why the currency pair is lingering within the lower part of its price realm is perhaps more intriguing. The USD/ZAR has mirrored the volatility and technical flow of other major currency pairs over the past few weeks.

    The U.S. Federal Reserve will release its Federal Funds Rate decision this coming Wednesday, and this is certainly having an effect on the USD/ZAR trading range. While the Fed is widely expected to raise interest rates by another 0.25% on the 26th of July, what the Federal Reserve says within its FOMC Statement is completely unknown and causing nervousness.

    Lower Trend of the USD/ZAR Highlights Financial Institutions Sentiment

    The USD/ZAR has demonstrated a downward trend since climbing to a high of nearly 19.15500 on the 7th of July.  The ability to traverse lower and with an element of fast price velocity on occasion has been noticed by experienced traders, but the past ten days have actually produced a consolidated battle following the bearish momentum. On the 13th of July, the USD/ZAR was trading near the 17.90000 ratio. Meaning since this time a week and a half ago, the USD/ZAR has actually gone up in price. Financial institutions have turned cautious momentarily.

    Day traders need to understand that the FOMC Statement from the U.S. central bank coming this Wednesday will cause instant volatility in the USD/ZAR. While a hike of the Federal Funds Rate has already been digested into Forex, financial institutions are keen to ‘hear’ if the Federal Reserve is actually going to signal they intend on becoming more dovish.

    The Fed will certainly not say they have become dovish in a direct manner, but if they say they are considering holding interest rates in place over the mid-term because inflation is subsiding, this might create a selling spark of the USD/ZAR. There are no guarantees and USD/ZAR day traders should wait for the Fed’s pronouncements unless they want to participate in full-blown bets.

    USD/ZAR Trading within a Tight Lower Price Range

    • The 17.94000 to 18.03000 price range within the USD/ZAR should be watched in the near term to see if this is sustained.
    • Traders who feel the USD/ZAR may have further room to create a stronger bearish move lower should certainly use risk management.
    • Conservative traders may want to use moves towards resistance as a launching point for selling positions while trying to gamble on small reversals lower.

    USD/ZAR Short-Term Outlook:

    Current Resistance: 18.04100

    Current Support: 17.97100

    High Target: 18.07100

    Low Target: 17.93010

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    Robert Petrucci
    About Robert Petrucci
    Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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