USD/ZAR Technical Outlook: USD Has Potential for Big Rally This Quarter vs Rand
- USD/ZAR choppy trading could continue for now
- Descending wedge forming could send it higher later on
- 20 or better may be in the works as bull market continues
USD/ZAR has not been a particularly easy read for some time now, and that may continue to be the case in the near-term. But overall, the choppy indecisive price action with price falling prices within the context of a broader uptrend could turn into a positive development for the long-term.
The decline since the coronavirus panic could set USD/ZAR up for a rally to commence at some point in Q4 that may eventually take price back to record highs. Patience, however, is likely required before choppy price action can give way to a sustained advance.
We may see further weakness to sub-16, which means a new low under the September bottom before seeing buyers step in a again. The fact, though, that buyers do keep stepping in on weakness is a good sign overall.
The wedge may not tighten up towards an apex until sometime in November, possibly even December before breaking above the top-side trend-line running off the April peak. In the event it does, a run to new highs into the 20s looks possible.
For short-term traders, taking a mean-reversion approach to trading may be most suitable – that is, fading rallies and sell-offs that run out of momentum. But traders will want to beware of continuing this tactic for too long as price works towards an apex and breakout risk grows.
USD/ZAR Daily Chart (choppy price action could lead to apex)
USD/ZAR Weekly Chart (trend is higher, could reassert soon)
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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.