However, the mechanism for inflation remains intact as the price of energy remains elevated and combined with solid employment figures from the U.S, the Federal Reserve is likely to hike borrowing costs in November by another 0.75%.
The USD/ZAR remains within its higher valued price range, and speculators now face a decision regarding short term direction as Forex markets remains nervous.
The USD/ZAR is trading near the 18.09500 level as of this writing with swift changes of value being displayed. Yesterday’s trading saw a high of nearly 18.23500 as the USD/ZAR hit new apex ratios, not seen since the height of the coronavirus chaos when the currency pair actually moved above the 19.00000 juncture in April of 2020. The ability of the USD/ZAR to sustain value over the 18.00000 is important and is likely causing financial institutions nervousness in South Africa.
The notion of a Dovish U.S Federal Reserve has disappeared for the time being
Last week’s downturn in the USD/ZAR and many other major currency pairs occurred based on the belief the U.S central bank would have to start becoming less aggressive with it interest rate policy. However, the mechanism for inflation remains intact as the price of energy remains elevated and combined with solid employment figures from the U.S, the Federal Reserve is likely to hike borrowing costs in November by another 0.75%. Thus, the notion of a suddenly dovish Federal Reserve disappeared quickly.
If the 18.0000 level is sustained in the USD/ZAR in the near term this could help create the mark as an important psychological inflection point for speculators. The sudden realization that U.S Federal Reserve policy is going to remain hawkish could continue to fuel a stronger USD globally. The USD/ZAR has seen higher values in the past and economic conditions with troubling outlooks remain.
USD/ZAR Resistance Levels continue to be Tested and Look Vulnerable
Short-term traders should monitor the 18.15000 to 18.16000 levels up above. If this resistance is proven vulnerable another leg higher that challenges the 18.20000 ratio is a possibility.The USD/ZAR may look overbought, but the long-term bullish trend may not be finished yet and if resistance levels remain within sight, traders could target higher levels if global market conditions remain fragile.
Speculators need to be extremely careful in the short term because the USD/ZAR is within a value range that will continue to create volatility. If equity declines persist in the major markets like the U.S, Europe and Asia, this will have a knock on effect which may cause financial houses to search for safe havens, meaning the USD may stay attractive because of purchases of U.S government bonds.
Traders who want to wager on downside reversals in the USD/ZAR should make sure they use take profit orders and tight stop losses. Being contrarian against the long term trend may feel like an adventure, but it could prove an expensive trading journey. For traders who want to continue to pursue the upside, buying the USD/ZAR on slight reversals lower while aiming for resistance levels up above may continue to produce solid wagers.
USD/ZAR Short Term Outlook:
Current Resistance: 18.16900
Current Support: 18.07500
High Target: 18.26900
Low Target: 17.98000