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USD/ZAR – US Dollar ‘Needles’ Higher Against SA Rand, Volatility to Persist

USD/ZAR – US Dollar ‘Needles’ Higher Against SA Rand, Volatility to Persist

Paul Robinson, Strategist

USD/ZAR Highlights:

  • USD/ZAR spike sharply higher and reversed lower
  • Short-term weakness, but another surge could come soon

USD/ZAR spike sharply higher and reversed lower

The USD/ZAR outlook had been bullish with emerging market currencies getting hammered versus the US Dollar, the only place USD has shown strength. Yesterday’s sell-off across financial markets caused a major spike-and-reverse in USD/ZAR, denting upward momentum for now.

This has a near-term pullback in focus, but there could within a short period of time be another push higher, even if only to test the spike high at 16.95. It’s unclear yet whether USD/ZAR will be able to trade to a new high after the short-term exhaustion pattern, or whether it will take some time to build a base before making a run to new highs. In any event, at some point the 2016 at 17.76 looks at risk.

For the short-term minded trader there will be plenty of volatility, with implied volatility around 24, almost 2.5 times higher than where it was in December. This will fall back as fear abates, but trading conditions in FX are expected to remain elevated for some time to come.

USD/ZAR might find some support around the Sunday gap-fill at 15.67. This could create a good risk/reward spot to at least look for price to make another run higher. Again, it may be a short-lived resurgence as time may be in need to build a base, but a trading opportunity nevertheless. If the gap fails, the next level to watch just below there is the August high just a tad under 15.50.

USD/ZAR Daily Chart (Reversal to bring support into play)

USD/ZAR daily chart

USD/ZAR Chart by TradingView

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.