The US dollar has rallied again against the South African Rand during trading on Thursday, crashing into the 14.50 level. This is an area that I have been talking about the last couple of days, and we have now arrived that. This is an area that will cause a certain amount of selling pressure, as we have seen more than once. However, we are closing out the candle stick rather well, at the top of the range which typically suggests that we are going to go higher.
If we can clear the 14.6 level, then I think the market probably goes looking towards the 15 level above. That’s an area that will attract a lot of attention, especially given the fact that it is such a large come around, psychologically significant figure. If we can break above there, then the US dollar will skyrocket at that point.
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To the downside, I see the 50 day EMA has just crossed over the 200 day EMA a couple of weeks ago, forming the so-called “golden cross.” That sits just above the 14 level, so I think that is essentially your “floor” at the moment. If we were to break down below that it would change quite a bit when it comes to the attitude of the market, and as a result it is the beginning of a significant selloff. At this point, the market will accelerate its negativity.
However, as things set up now it looks like we are getting ready to break out to the upside so I remain bullish of the US dollar against the South African Rand, especially considering that we have so much in the way of political instability in South Africa, and of course the overall attitude of markets stepping away from emerging markets.