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USD/ZAR – Dollar vs Rand, Bounce May Morph into a Full-on Rally

USD/ZAR – Dollar vs Rand, Bounce May Morph into a Full-on Rally

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USD/ZAR Highlights:

  • USD/ZAR powerful bounce off low could spawn into rally
  • But more work needs to be done for conviction

USD/ZAR powerful bounce off low could spawn into rally

USD/ZAR came off the low last week in powerful fashion as global stock markets were roiled, and while stocks have recovered nicely we have not seen the Rand, or other emerging market currencies for that matter, take back their losses in similar fashion. These currencies aren’t stocks but worth noting as longer-term trends in EMs could be reasserting themselves as risk sentiment could turn.

USD/ZAR isn’t bouncing from any particular point on the chart that is of major interest, but last week’s reversal was strong and helps solidify it for the moment. It will be important for last week’s low at 16.32 to hold, of course. A dive back towards this threshold is “allowable”, but should not violate it.

Looking higher, there is a decent area of resistance around 17.76/18.00. A run up to this point will be a sizable retracement of the May to June decline, and will constitute a fairly significant inflection point if met. A break on through could quickly have the 19.00-area in focus and a new high towards 20.00.

A rejection will perhaps put the ball back in the court of sellers with a backstop to work with. For now, we are neither here nor there, but more strength does look to be in the cards. Continue to keep an eye on other major EMs (i.e. MXN, RUB, TRY, BRL, CNH) for broad signs of strength and weakness in that space. And also continue to keep a watchful eye on the stock/risk trends.

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USD/ZAR Daily Chart (on further strength watch area ahead)

USD/ZAR daily chart

USD/ZAR Chart by TradingView

USD/ZAR Weekly Chart (solid reversal, generally higher trend)

USD/ZAR weekly 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.