As of this writing the USD/ZAR is near the 16.57300 ratio and challenging highs seen around the 10th of June, when in fact the currency pair moved even higher correlating with choppy trading in the broad Forex market.
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Conditions in the broad Forex market remains choppy as financial institutions clearly are nervous about their outlooks. The USD/ZAR is correlating to the broad Forex market and has once again started to create higher ratios. The USD/ZAR is currently near the 16.57300 mark, which was last seen in the second week of June. Although the USD/ZAR is below highs seen from the 5th until the 10th of June, this isn’t helping calm traders quite yet.
The upwards mobility of the USD/ZAR has matched the strong USD centric trend which has emerged since the Fed’s FOMC meeting was conducted last Wednesday. However, the interpretation of why the USD stronger momentum has been ignited and remained sustained are up for debate. Yet, the results of buying cannot be argued, the USD/ZAR is approaching a higher realm.
Overbought Considerations and Short-Term Wagers
Not only are Forex conditions relatively nervous, market sentiment in global equity markets also are rather tentative and some large declines were seen yesterday. The USD/ZAR may look overbought compared to its mid-term trading results and day traders cannot be blamed for looking at resistance above as a selling opportunity in order to take advantage of reversals which may be favored. However, picking the time the USD/ZAR will again begin to see a crowd of sellers may be problematic for the moment.
If U.S equity indices continue to face selling, this could spark additional risk adverse trading tendencies and cause the USD/ZAR to remain inflated. Yes, the South African central bank has also warned inflation must be combated the past handful of days, sending signals that a higher interest rate is being considered. Yet, this has been a common call from a handful of central banks. And this is actually a positive sign for the South African Rand because it is being managed with transparency.
Optimism and Looking for a Selloff
While there are reasons to worry about the higher USD/ZAR momentarily, the value of the currency pair is likely linked to global events and sentiment. The USD/ZAR above the 16.60000 may be considered too high by financial institutions.
Yes, there are risks certainly that must be considered, particularly if investment houses choose to put there money into U.S bonds which are yielding higher rates.
But if the U.S stock markets become somewhat calmer, the Forex market will likely become more comfortable too.
The USD/ZAR should in the short and near-term be treated with caution because of nervous conditions, but day traders may believe that looking for some declines in value via the currency pair does present an opportunity.
Again, traders can be correct about moves and find that timeframes unfortunately do not meet their expectations.
USD/ZAR Short Term Outlook:
Current Resistance: 16.57700
Current Support: 16.56200
High Target: 16.58700
Low Target: 16.52100
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