The South African Rand continues to exhibit a tight consolidated range. The USD/ZAR is trading between 17.2000 and 17.4500 with a rather mesmerizing amount of stability. This may be allowing experienced speculators to pick and choose short term trends and challenge buying and selling positions in a worthwhile fashion. Gold is trading within record territory as of this morning; the precious metal continues to attract buyers, so why isn’t the South African Rand gaining against the US Dollar?
The USD/ZAR has formed a very consistent trading range since the 11th of June, displaying values between 17.000 and 17.5000 in a dominant manner. Traders need to understand that even as Gold gains in value it doesn’t mean the South African Rand will do this consistently too. However, the strength of the precious metal certainly may give the USD/ZAR a fairly strong resistance level which proves hard to break.
As the consolidated range of the USD/ZAR intensifies, speculators may be keen to believe a breakout of price will undoubtedly occur. Because gold is highly-priced it may also add to the perception the USD/ZAR should be experiencing more short selling. However, due to ongoing concerns about coronavirus and its effect on the domestic economy of South Africa an undercurrent of support has been created too for the USD/ZAR, and this has likely helped create the rather intense short term consolidated range.
Resistance remains strong near the 17.5000 level and speculators who believe this level will hold may want to use limit orders to place selling positions and seek reversals with entry points between 17.3500 and 17.4000. Risk to the upside remains rather lackluster provided there isn’t a sudden burst of developing negative news in the global markets. Risk appetite remains fragile, but it is clear financial institutions internationally continue to display bullish tendencies within the major stock indices.
If a trader still suspects the USD/ZAR is overvalued and risk-reward ratios actually show the US Dollar should be bought against the South African Rand, this is a speculative position that cannot be faulted either. However, to take a long position and buy the USD/ZAR it should be done when the forex pair approaches the 17.2000 juncture. It is all about perception because the South African Rand has not gained an immense amount of value as Gold has prospered, it may signal that the USD/ZAR under present conditions has room to traverse higher if risk-averse trading magnifies.
South African Rand Short Term Outlook:
Current Resistance: 17.5000
Current Support: 17.2000
High Target: 17.6000
Low Target: 17.0000
