I still believe that we will see the 17 ZAR level tested.
The US dollar has pulled back a bit during the trading session on Thursday as we have seen an oversold condition in this pair. That being said, the market has seen the 16.80 level offer significant resistance, but quite frankly I think it probably had more to do with the idea of the market being overdone. At this point, pulling back to the 16.40 level makes quite a bit of sense, and of course, it also makes a certain amount of sense that we have seen this market pullback as we are going to have to deal with the jobs number coming out on Friday.
That being said, the longer-term attitude should remain, due to the fact that the interest rates in America are rising, and quite frankly there are a lot of concerns out there when it comes to the global growth situation. The market will continue to see a lot of volatility, as it is an emerging market currency, and of course there are a lot of concerns when it comes to not only global growth, but recessionary concerns, monetary tightening, and much more.
Furthermore, Africa’s not exactly the first place money goes flowing to when you think of the possibility of economic expansion when there are a lot of concerns. In other words, there has to be a huge “risk on attitude” around the world. The 16.40 level is an area that previously had been resistive, so therefore I think it makes quite a bit of sense that we would see that area offers support based upon “market memory.” Breaking down below there then opens up the possibility of a move down to the 16.20 level. Ultimately, I think this is a situation where we are looking to buy the dip and may have to do so after the jobs number, but ultimately this is a market that has much further to go. I still believe that we will see the 17 ZAR level tested, and perhaps even broken above if we continue to see such an ugly outlook for the global economy. Furthermore, it’s worth noting that the South African economy is highly levered to hard commodities such as diamonds, gold, etc. Because of this, we need to see metals take off to the upside to help as well.