Traders of this currency pair have experienced a unmasking of cautious sentiment which has become overt nervousness being displayed by financial institutions in Forex. The currency pair has correlated to the broad markets as two major distractions stir the USD/ZAR – higher energy costs and Wednesday’s upcoming U.S Federal Reserve pronouncements. Speculators have had an opportunity to ride the back of upwards momentum the past handful of days. Yet, yesterday’s highs may prove to be a testing ground for resistance until more impetus is delivered for traders.
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USD/ZAR Faces a Volatility Test Ahead of the Fed
After a sustained downwards thrust the USD/ZAR is finding a reversal take shape as financial institutions brace for new insights that will come tomorrow. It appears many analysts are leaning heavily into the potential of a 0.25% hike – per the FOMC rate announcement. However, this prediction which seems to be seeping into the trading sentiment of financial institutions is not guaranteed. While the price of WTI Crude Oil is certainly higher and hovering over $100.00 per barrel. The higher costs are coming because there is a fear supply is limited because of the Middle East conflict. The Fed may explain the interest rate hike as a one time situation which could be reversed should an improvement occur regarding supply and lower WTI Crude Oil prices become reestablished. The USD/ZAR like all other major currency pair will see volatility tomorrow and day traders will have to be prepared.
USD/ZAR Holds Near 16.32 as Intraday Volatility Persists
The USD/ZAR is traversing near 16.32200 depending on the bids and asks. The broad Forex market is behaving rather fast and this may remain a reflex lasting into late Wednesday. The USD/ZAR was near 15.95000 this time last week. The last time the USD/ZAR has traded in its current realm was in the second week of August, but this was occurring as the currency pair was coming off of highs which developed in late July and had taken the currency pair towards 16.94000.
Financial institutions and speculators are used to price velocity in the USD/ZAR and the next couple of days are likely to provide plenty. Depending on the outcome of tomorrow’s Federal Reserve decision and Press Conference the entire Forex market will prove dynamic. What Fed Chairman Kevin Warsh has proven ineffective doing the past two months is to make the broad markets calmer, instead investors are nervous and still want more clarity and until that is achieved volatility will be seen. Technically the USD/ZAR can be expected to remain nervous via intraday results.
Fed Reaction and Middle East Risks Could Move USD/ZAR
The broad investment markets are also showing a large amount of anxiousness. Large players are bracing for the Federal Reserve and they are also rather wary about recent developments in the Middle East as the Iranian war has spilled over into Saudi Arabia. The danger to global Crude Oil supply is a substantial concern that is triggering worries. U.S Treasury yields are near expensive highs and this plays into Forex and the USD/ZAR.
The Fed certainly is aware if they raise interest rates tomorrow this will make paying off U.S debt more expensive. Short-term USD/ZAR traders may view those thoughts as distractions, but financial institutions do not. Fed Chairman’s Warsh’s question and answer session with the media during the Fed Press Conference will stir emotions and reactions in Forex, including the USD/ZAR – meaning late on Wednesday retail traders participating should be paying attention.
USD/ZAR Price Chart Showing Bullish Trend
USD/ZAR May Have Already Priced In a Fed Rate Hike
It is important to remain calm for day traders. Those wanting to participate in the USD/ZAR in the short-term need to understand that bids and asks may see a wider than normal spread, this as financial institutions try to protect themselves and focus on collecting transaction fees instead of trying to position themselves alone in what will be a rather volatile Forex market. The ability of the USD/ZAR to climb higher the past five trading days is evident, but reversals lower have certainly been seen too in bursts. Day traders may believe the USD/ZAR can go higher, but there is a possibility large players have already factored an interest rate hike into the value of the currency pair.
Fast Markets Keep Risk Management in Focus
Speculators who choose to participate today and tomorrow in the USD/ZAR to wager hopefully are looking for adventure as much as they are looking for profits. The circumstances and difficultly retail traders will face in the near-term needs solid risk management. One technique to avoid getting knocked out of the USD/ZAR to quickly will be to widen stop loss targets, but this also means very conservation leverage will have to be practiced too. The USD/ZAR is set to be fast.
USD/ZAR Short Term Outlook:
Current Resistance: 16.33400
Current Support: 16.31100
High Target: 16.16410
Low Target: 16.28700
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