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Day traders who have pursued the thought that this currency pair had been overbought towards the first week of October have likely seen their perspectives confirmed. The broad Forex market continues to offer a jumble of results per major currencies paired against the USD, but it can be said not only has the South African Rand correlated well in foreign exchange but has shown that financial institutions outlooks look almost comfortable about the ZAR. The lower trend in the USD/ZAR, which has developed again over the past handful of days now will be tested via compelling support levels.
Dollar Demand Meets a Cautious Market
Caution certainly continues to be seen in global markets and less than stellar mid-term outlooks remain in vogue. The broad Forex market continues to see USD centric strength persist, but the outright flood into the USD has stopped for the time being. U.S Treasury yields remain elevated too but have also started to show evidence of reaching levels where investors are starting to react with mixed behavior.
The USD/ZAR, which has enjoyed a rather solid bearish trend and had challenged long-term lows, remains in a semi-elevated realm, but selling in the currency pair since last Wednesday has brought known values into sight that financial institutions will now have to judge their existing mid-term projections. This may mean that retail traders could see a rough patch of results develop in the USD/ZAR near-term.
The 16.40000 Area Draws Attention
As of this morning’s price action the USD/ZAR is near the 16.40000 realm with the usual large spread being displayed. Traders who pursued selling when the USD/ZAR was around the 16.65000 mark last Wednesday and continued to sell into yesterday’s results may be pleased by the results. The 16.40000 mark and lower will be a good testing ground for sentiment of financial institutions because the last time the USD/ZAR traversed under this level in a sustained manner was in the last week of September.
On September the 16th and 17th the USD/ZAR was near the 16.22000 vicinity. This is important to note because it was amidst buying action as financial institutions anticipated correctly the U.S Federal Reserve’s interest rate hike. The Fed will be meeting again next week, and this is likely to cause more turbulence in the USD/ZAR for day traders, as volatility is likely to increase over the near term and into next week’s price action.
Volatility Keeps the Near-Term Picture Unclear
Traders should be careful of confirmation bias via their perspectives. Meaning that until the USD/ZAR produces sustained trading below the 16.40000 ratio for more than a handful of hours, they should limit their selling ambitions at the current price levels. Yes, the USD/ZAR may look like it is still in overbought territory to some speculators and they may be proven correct over time, but because of the anxious global markets that persists, overly ambitious price targets could prove expensive mistakes if a trader simply isn’t satisfied with a quick hitting profit and insists on trying to beat the casino. Intraday volatility in the USD/ZAR is likely to remain a fixture over the next few days and into next week, risk management will be needed.
USD/ZAR Price Chart – Seen Lower
The Fed Meeting May Shape Expectations
While traders may carry the belief that the USD/ZAR needs to be in a lower price realm, attaining lows from earlier this month and late September still appear to be wishful thinking. Financial institutions will want their outlooks confirmed by the U.S Federal Reserve next week.
With energy prices remaining in higher ground inflation concerns are legitimate. The USD/ZAR has been able to demonstrate a solid lower move the past few days, but Forex is seldom a one-way path particularly for those trying to wager on short-term prospects.
Cautious Sentiment Defines Current Trading
The USD/ZAR can move fast via its price action not only due to a large spread which financial institutions use to create a safe middle ground for themselves to ensure transaction fee profits, but because of relatively low volume compared to many major currency pairs. The USD/ZAR remains correlated to the broad Forex market in a healthy manner, this means cautious attitudes should be expected to be seen via the values the currency pair exhibits today and tomorrow.
What to Watch Next
USDZAR is trading near the 16.40010 support area, while 16.41300 is the nearest resistance level. Continued trading below resistance would keep the recent pullback in focus. A sustained move below support, however, would raise the question of whether selling pressure is extending beyond the latest decline.
A recovery above resistance would challenge the immediate bearish tone and return attention to the pair’s broader range. With the Federal Reserve meeting approaching, the coming sessions may reveal whether USDZAR is settling near support or preparing for another period of volatility.
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