Since the last report the USD/ZAR traded through the initial R14.50/$ target before giving back some of its gains. The price has now pulled back to the R13.95 level which appears to be support for now. The USD/ZAR price does look to be attempting a bullish price reversal supported by the stochastic crossing its signal line in oversold territory. From current levels we expect renewed gains for the dollar (weakness for the ZAR) with the initial targets being between R14.45/$ and R14.57/$ (previous closing and intraday short term highs). The longer term target at R14.80/$ remains. We are now using a close below trend line support at R13.80/$ as our failure level (revised higher from R13.70/$ previously).
In our last report we:
- Continued to favour further rand weakening against the dollar and maintained R14.50/$ and R14.80/$ as favoured upside targets
- While the technical view looked bullish, the political uncertainty and upcoming ratings review seem to support the technical indications
- Concerns highlighted were that the upcoming ANC elective conference may be postponed (not confirmed) and that South Africa could be subject to downgrades of its local currency credit ratings by Moody’s and S&P on the 24th of November
- Therefore for traders not already committed, short term weakness towards R14.20/$ was considered the first long entry opportunity
- although we considered any bullish reversals at all the levels ahead of 13.70/$ as long entry opportunities
- Only a close below R13.70/$ was considered a failure of our bullish assumptions
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