The last time the South African rand was this low against the US dollar was back in the June of 2016. Yesterday, South Africa’s GDP data showed that the economy entered a technical recession as it contracted in Q2 for the second consecutive quarter, which caused the rand to fall more than 3% against the US dollar yesterday. The rand continues to be sold today as well, and this may continue for a while, at least until the government finds a way to stabilize the economy.
USD/ZAR continues to trade above the medium-term upwards moving trendline taken from the low of the 26th of March. At the same time, the pair sits above its steeper upside support line drawn from the low of the 8th of August. All this creates good conditions for the bulls to jump in.
Today, we saw USD/ZAR breaking its key level of resistance at 15.42, marked by the peak of the 13th of August. Further acceleration of the rate could lead to a possible test of the 15.98 zone, a break of which could set the stage for a touch of the 16.34 barrier, marked by the high of the 26th of February 2016 and the low of the 13th of January of the same year.
Now, if we get a move back down below the 15.42 zone, this could lead to a drop towards the 14.83 level, or even a test of the previously mentioned steep upside support line. This may be a good opportunity for the bulls to jump into the action and drive the pair back up to the levels mentioned above.
For the bears to take control at least for a short period of time, USD/ZAR may have to break and close below the abovementioned steep upside line and also below the 14.58 hurdle, marked by the low of the 31st of August. This way, the path could be opened towards the psychological 14.00 area, a break of which could set the stage for a test at the medium-term uptrend line taken from the low of the 26th of March. This is where the bulls could try and flex their muscle against the bears, in order to take control of the pair again.
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