After Moody's decision on Friday night to downgrade South Africa's credit outlook to negative, there is a keen amount of interest in the direction of the rand and I thought it would be useful to make an observation in this regard.
Firstly, it is interesting that the rand has made 3 lower swing high's since tagging the 15.44 horizontal resistance level back in August. This does indicate some sort of strength in the price action so perhaps one shouldn't get too negative at this point in time. We likely have a bit of time to buy until the next important budget speech in February 2020.
The area between 14.50-14.60 has been an important zone of support & resistance this year and what makes this level even more important is that we currently have the 200 day moving average @ 14.476 rising by about half a cent a day. This will likely be a tough area to crack and should we trade back into that zone, then there is that possibility that a return of a risk off environment in global markets could stop the rand from making much further headwind. The market left an open gap @ 15.00 created by Moody's announcement on Friday after FX markets closed & there is no doubt that the rand bears are licking their lips in anticipation of this gap closing.
The RSI is constricting in the form of a triangle, which leads me to believe that price action will also likely stay quite tightly range bound.
In a nutshell, my view is that we could likely trade in this range between 14.50 to 15.00 until the annual budget next year in February 2020 (in the absence of any other global market developments). Watch for a reversal off the 200 day moving average @ 14.50 should we trade there in order to initiate a short position in the rand with a view that it trades higher to close the gap @ 15.00.
Firstly, it is interesting that the rand has made 3 lower swing high's since tagging the 15.44 horizontal resistance level back in August. This does indicate some sort of strength in the price action so perhaps one shouldn't get too negative at this point in time. We likely have a bit of time to buy until the next important budget speech in February 2020.
The area between 14.50-14.60 has been an important zone of support & resistance this year and what makes this level even more important is that we currently have the 200 day moving average @ 14.476 rising by about half a cent a day. This will likely be a tough area to crack and should we trade back into that zone, then there is that possibility that a return of a risk off environment in global markets could stop the rand from making much further headwind. The market left an open gap @ 15.00 created by Moody's announcement on Friday after FX markets closed & there is no doubt that the rand bears are licking their lips in anticipation of this gap closing.
The RSI is constricting in the form of a triangle, which leads me to believe that price action will also likely stay quite tightly range bound.
In a nutshell, my view is that we could likely trade in this range between 14.50 to 15.00 until the annual budget next year in February 2020 (in the absence of any other global market developments). Watch for a reversal off the 200 day moving average @ 14.50 should we trade there in order to initiate a short position in the rand with a view that it trades higher to close the gap @ 15.00.
"If you do what you love, you'll never work a day in your life" - Marc Anthony