The USD/ZAR has begun the day’s trading with a reactionary selloff taking the currency pair to a rate of nearly 16.34800 as of this writing. Speculators participating today need to understand that volumes in the broad Forex market will be very light due to holidays in Europe and North America. Added to that mix is combustible shifting sentiment which thus far turned positive as the U.S and Iran make it known that they are pursuing a resolution to the Middle East conflict.
Risk appetite from the start this morning in Asia’s trading has shown positivity, and the USD/ZAR has benefited from this surge. However, because of light trading the initial move lower in the USD/ZAR should be watched intently to see what type of price action develops in the coming hours and may become choppy due to a lack of volume.
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Speculators who are able to take positions today will have to be prepared for wide spreads and the possibility that bids and asks could prove confusing in the coming hours, particularly with sudden jolts. Financial institutions in Asia and South Africa are trading, but the USD/ZAR today may be a realm in which not enough volume is really being generated for day traders wanting to participate with the big boys is logical.
The lack of volume could cause sudden changes in direction that have wide differentials and knock smaller traders using tight stop loses out of trading positions which are too conservative. Retail traders instead might want to wait for tomorrow’s Forex action to pursue the USD/ZAR. There will be a temptation to believe that today will be a missed opportunity because of the shifting sentiment which many folks interpret as positive, but tomorrow’s trading is likely to prove a powerhouse too and perhaps offer tighter spreads in Forex.
Shifting Sentiment and Policy Outlooks
The potential of a U.S and Iran resolution has markets on a razor’s edge and ready to react. The USD/ZAR has seen an initial selloff that is easy to see and understand.
The question is if momentum will continue today or start to run out of power with lower volumes taking effect.
Day traders should watch the news carefully, because there is a chance that the negotiations between the U.S and Iran could create heightened tensions too, this if there are changes in stance if disagreements become loud.
The move lower in the USD/ZAR this morning created a gap and if positive sentiment remains further selling could develop, but speculators do need to be careful.
Over exuberance and bursts of price action often leads to reversals developing in opposite directions.
USD/ZAR Short Term Outlook:
Current Resistance: 16.35800
Current Support: 16.34100
High Target: 16.39200
Low Target: 16.30050