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USD/ZAR: Run Lower Being Followed by Test of New Price Range

 The USD/ZAR could find rather light conditions produce choppy results which could prove suspicious.

The USD/ZAR significantly dropped lower last Tuesday after the publication of U.S inflation data, mirroring many forex pairs, but now a test of its ‘new’ values is being fought.

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    Bearish speculators were rewarded with a lightning-quick selloff early last week in the USD/ZAR. After resistance levels near 18.79000 proved very durable on Monday and early Tuesday of last week, the USD/ZAR dove to lows around the 18.10625 mark briefly before financial institutions began to search for equilibrium. The sudden move lower in the USD/ZAR developed rapidly when the Consumer Price Index numbers from the U.S came in below expectations.

    Based on the CPI results and Wednesday’s PPI statistics, inflation in the U.S. is showing signs of eroding. This puts the Federal Reserve in a position in which it may actually sound less aggressive during its FOMC Statement in December. Financial institutions quickly latched onto the bearish outlook regarding the USD and many major Forex pairs, including the USD/ZAR, developed bearish sentiment. Now the question for day traders is what the USD/ZAR will do next.

    Dive Lower and Consideration of New Depths for the USD/ZAR

    The abrupt turn lower in the USD/ZAR had been showing signs of a potential selloff before it occurred. Trading before the price velocity to values last seen in the first week of August 2023 happened after the USD/ZAR had turned in a rather steady bearish move since the last week of October.

    The fall below 19.00000 on the 26th of October started to develop rather significant resistance, yes, reversals upwards did occur, but selling remained rather consistent. The move to fresh lows early last week and then the choppy trading that followed into this past weekend shows financial institutions may think equilibrium has been found for the moment. As of this morning, the USD/ZAR is actually touching short-term resistance near the 18.44000 level and it should be monitored. Lower depths in the USD/ZAR may be hard to sustain in the near term, the question is where fair value can be found.

    Choppy Trading in the USD/ZAR may Remain Strong this Week

    Forex trading volumes this week will decrease starting late on Wednesday. The U.S. celebrates Thanksgiving on Thursday and many financial institutions will close for a long weekend. The USD/ZAR could find rather light conditions produce choppy results which could prove suspicious. Trading today and tomorrow leading into Wednesday may be a good indicator of the technical range for later this week. Speculators have already received a large amount of USD bearish information, but the quick move lower in the USD/ZAR may be looked upon as an overreaction in the near term.

    • A test of the 18.25000 to 18.50000 range in the USD/ZAR would not be a surprise in the near term.
    • Traders participating in the USD/ZAR need to understand lighter volumes starting on late Wednesday could make the currency pair vulnerable to sudden bursts, but also cause rather limited price action too.

    USD/ZAR Short Term Outlook:

    Current Resistance: 18.44350

    Current Support: 18.40700

    High Target: 18.48100

    Low Target: 18.33600


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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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