USD/ZAR has shown solid buying the past couple of days, and sustained a higher near-term range early this morning near the 17.77000 vicinity depending on trading platform bids and asks.
After traversing to a low of nearly 17.46300 on late Wednesday, the USD/ZAR now finds its value around the 17.77000 area on early Monday. The USD/ZAR was able in the middle of last week to challenge lows not seen since early July, which had also last seen sustained trading in November and October of 2024. However, the run up in the USD/ZAR which essentially started on Thursday has lasted into this week’s start of trading.
The question speculators may want to ask themselves is why the reversal higher has not only occurred, but been able to show a bit of power – taken from a day trader’s perspective – when trade tariff news has been mostly positive. The USD/ZAR is correlating to the broad Forex market, the move higher isn’t a direct reflection on the South African Rand, the EUR/USD has seen selling this morning as an example.
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Near-Term Speculative Risks
Financial institutions are certainly bracing for Wednesday’s FOMC pronouncements from the U.S Federal Reserve. While it is my opinion the Fed should have cut interest rates three or four months ago, the U.S central bank instead has remained very stubborn while preaching uncertainty. U.S inflation has been under control. The Fed has literally been saying they are unsure about the potential effects of U.S tariff ramifications.
The buying of the USD/ZAR the past couple of days may be a result of financial institutions becoming overly cautious and wanting to hear what Jerome Powell says on Wednesday from the Fed. Outlook is murky regarding interest rates. The Fed is unlikely to cut rates this week, but if they say they are going to become aggressive about cutting rates in the coming months the USD could become weaker. However, the Fed is unlikely to change its song and dance routine. Caution is the known element from the Fed at this juncture. Meaning large traders may continue to trade a known equilibrium and react to technical interpretations of oversold and overbought Forex conditions.
USD/ZAR Could be Overbought
The USD/ZAR looks overbought at its current levels. Yes, the USD/ZAR has many questions because of poor fiscal management from the South African government in many spheres, but the correlation to the broad Forex market overrides those concerns.
- While the USD/ZAR is quite capable of traversing above the 18.00000 level with little effort, if sentiment in the broad markets remains cautiously optimistic at some ratio – perhaps soon – the currency pair may be looked upon as being overbought.
- Uncertainly not only rules the Fed at this moment, but rules Forex too.
- The USD has had weaker characteristics since April, and it is likely not done remaining within the lower elements of its value against major currencies.
- The near-term in the USD/ZAR will be choppy. Looking for downside could be correct, but plenty of risk management will be needed.
USD/ZAR Short Term Outlook:
Current Resistance: 17.81000
Current Support: 17.76980
High Target: 17.88500
Low Target: 17.69600
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