The USD/ZAR has seen some upwards momentum the past day and half, this after the currency pair correlated to the broad Forex market and displayed powerful selling mid-Friday when financial institutions reacted to U.S employment data. As speculators and some financial institutions remain wary of sudden sparks from the Middle East, key U.S economic data is starting to play a role in USD/ZAR value too. And nervous sentiment which has existed in global assets will continue to have to balance a complex web of considerations, which may make trading the USD/ZAR challenging but worthwhile if solid tactical strategy is used.
Behavioral Sentiment Reflects a Market Awaiting Bigger Volume
After touching a depth on Friday not seen since the 3rd of March, the USD/ZAR has reversed slightly higher. However, the USD/ZAR has not left its lower realm and price velocity needs to be watched in the coming hours to see how financial institutions react to current broad market conditions. Selling of the USD became strong going into the weekend when U.S jobs numbers did not meet expectations of some analysts. Yesterday’s trading in the USD/ZAR also dealt with the fact major South African banks were on holiday for Women’s Day which was officially observed on Sunday, but resulted in a long-weekend.
Now traders are waiting in anticipation of Wednesday’s inflation numbers from the U.S, however there are also shadows still lurking from the saga in the Middle East as Iran and the U.S fail to find a negotiated settlement. Traders may look at the current conditions in the USD/ZAR and come to the conclusion that behavioral sentiment is awaiting impetus to shake the market, but they should be aware volumes will increase in the currency pair today too.
Technical Ratios Remain Key Ahead of Wednesday's Inflation Data
Market action in the USD/ZAR has seen a move higher in the early hours today. The currency pair is near 16.24800 within a large spread. Current values of the USD/ZAR are near technical ratios seen before financial institutions largely begun to react in unison to the U.S Non-Farm Employment Numbers before displaying stronger selling. Yesterday’s trading in U.S equities produced rather sideways price action, and combined with today’s start in the broad Forex market and the USD/ZAR, indications are that financial institutions are cautious.
Tomorrow’s Consumer Price Index data from the States is being awaited on as folks try to decipher the U.S Federal Reserve’s next policy announcement in the middle of September. Wednesday’s inflation results from the U.S CPI figures will be a definite catalyst depending on the outcome. What traders also need to understand is that the Fed’s Jackson Hole Symposium takes place in Wyoming with all major central banks primed to participate in late August. Thus caution may remain a strong factor and technical ratios may prove important near-term.
Wednesday's Inflation Data Points to a Possible Shift in Outlook
The broad Forex market while showing early caution today is also keeping most major currencies paired against the USD within known working value realms seen the past couple of days. Traders looking for a sudden bolt of price momentum may walk away disappointed via short-term conditions, but tomorrow’s trading will be a different story.
The swift reaction lower on Friday as weaker hiring caused headaches now awaits Wednesday’s inflation data. Because of the higher energy costs caused by the Middle East war the past handful of months, tomorrow’s CPI data will take centerstage. Reactions to higher inflation could cause large players and financial institutions to reconsider their mid-term outlooks. The USD is going to be in the limelight tomorrow and the USD/ZAR will react to the data results.
Market May Have Already Factored In Wednesday's Inflation Result
While many analysts suspect inflation will come in higher than anticipated tomorrow, day traders should contemplate the notion that some large players may have already factored this into their USD/ZAR positions. Meaning that the currency pair will definitely react to the inflation data, but it might not be in the manner anticipated by retail traders.
If inflation goes up but meets expectations, this might not cause a massive reaction in the USD higher, because some of the buying may have been traded into the marketplace already. Thus, if CPI is somewhat polite the USD/ZAR may find reasons to start seeing what some may find an odd reversal lower. Day traders need to braced for all outcomes on Wednesday.
Thin Volume Yesterday Highlights Importance of Tomorrow's U.S. Data
Short and near-term speculators should be vigilant through Wednesday. The USD/ZAR has shown the ability to remain within the lower part of its price realms and touched values not traversed in a handful of months this past Friday. Yesterday’s lack of volume because of the South African holiday and today’s early results have produced a cautious approach, this as tomorrow’s important U.S inflation numbers approach.
USD/ZAR Short-Term Outlook: Key Levels to Watch
Current Resistance: 16.24980
Current Support: 16.24500
High Target: 16.30160
Low Target: 17.21300
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