I have no interest in shorting, at least not yet.
The US dollar initially pulled back during the trading session on Thursday but found enough buyers underneath to send it above the 16 Rand level. This is an area that previously had been trouble, so be interesting to see if we can keep up this type of momentum. We are overbought, but that does not matter when the bond markets are freaking out. Furthermore, a lot of people are shunning the idea of emerging market currencies or dad, so that will continue to have major ramifications when it comes to the USD/ZAR pair.
Underneath, I see a significant amount of potential support at the 15.60 Rand level, so a pullback would more than likely find buyers in that area. Nonetheless, it should be noted that we started to accelerate to the upside again during the end of the session in New York, suggesting that perhaps we are going to see a run much higher. If that is the case, then I think that we are going to see an explosive move sooner rather than later. The question now is whether or not people will want to hold South African Rand into the weekend on any type of bigger move? I suspect that if we do get a pullback on Friday, it will be nothing more than a bit of profit-taking.
Underneath, you can see that the 50 Day EMA is sitting just above the 15 Rand level and is curling higher. It is about to cross above the 200 Day EMA, which is a bullish sign and kicks off what is known as the “golden cross.” While I am not necessarily a huge fan of this technical indicator, I recognize that a lot of longer-term traders pay a certain amount of attention to it. Because of this, you have the potential longer-term institutional “buy-and-hold money” coming back into the market as well. The US dollar seems to be about the only game in town, so for a currency like the South African Rand to struggle, there is not a lot of imagination needed to see this happening. Furthermore, if commodities continued to get sold off a bit, that will also work against the South African Rand as it is so highly correlated to hard assets such as gold and other minerals. I have no interest in shorting, at least not yet.