• The USD/ZAR has gone back and forth during the trading session on Wednesday as it looks like we are running out of momentum.
• The US dollar has been straight up in the air for some time, and now we have stalled at the 17 Rand level.
• The 17 Rand level has been important previously, so it’s not a huge surprise to see that we have stalled here.

Furthermore, it looks like the markets are paying close attention to the Jackson Hole Symposium, meaning that the US dollar might be a bit slow over the next 24 hours as traders are trying to figure out whether or not Jerome Powell is going to remain hawkish. Keep in mind that this pair will rise in a “risk off” type of environment, but at this point, it’s likely that we would need to see Jerome Powell sound extraordinarily hawkish. He very well could, and that could send this market to fresh, new highs, as the US dollar will be like a wrecking ball against most currencies, especially emerging-market ones.

Rand Could Be Hindered By Interest Rates

On a pullback from here, I think there is plenty of support underneath, and therefore it’s probably only a matter of time before we see this market turned back around. This  is a market that I think will see support at the 16.50 Rand level, not only due to the fact that there’s a certain amount of psychology attached to the “midcentury mark”, but also the 50 Day EMA. After that, then the 16 Rand level will offer support based upon the large, round, psychologically significant figure and the 200 Day EMA.

It’s very likely that higher interest rates will continue to punish emerging-market currencies and economies around the world, so I look at any pullback as a potential buying opportunity. The 200-Day EMA would have to be broken below, and of course; we would have to see general US dollar weakness in order to see an opportunity to start shorting against the Rand. Keep in mind that the South African Rand is also highly levered to the commodities markets, so pay close attention to them as well. This could lead to a bit of a “death spiral” against the South African Rand because higher interest rates going forward will slow down economic demand for those commodities.

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The DAX has initially tried to rally during the trading session on Thursday but has found the €14,500 level to be difficult to overcome. We have fallen from there and now it looks as if the market may be trying to decide whether or not it can continue to go higher as we have bounced far too quickly from the bottom. Ultimately, the market collapsed and then bounced. The market has been so out of control lately that sooner or later the momentum has to stop.

If we break down below the bottom of the candlestick for the trading session on Thursday, as likely that the market goes look towards the €14,000 level. If we break down below there, then it is likely that we go looking towards the €13,500 level after that. Longer-term, I would not be surprised at all to see this index test the lows, but obviously, anything is possible in this type of situation.

The fact that we could go nowhere after the massive and impulsive candlestick during the previous session suggests that we are struggling. The €15,000 level above would be the next target if we go higher, as it was previous support and therefore a certain amount of “market memory” comes into the picture. The downtrend was there for a reason, and those concerns in the European Union are going away anytime soon.

I think the only thing that you can count on in the DAX right now is a lot of volatility, and therefore you need to be cautious with your position size because losses can pile up rather quickly if you are not careful. The DAX of course is highly sensitive to any idea of exports, due to the fact that so many multinational conglomerates are part of the index. The rest of the world is in the process of slowing down, so it certainly makes sense that the DAX will fall right along with it. It is a situation where I am waiting for signs of exhaustion to short or break down below the lows of the session that we just printed on Thursday. Again, be cautious with your position size, which of course is something that you should do with any market in this type of environment as there is so much risk out there.