The relative calm of August trading is likely to fully disappear in the coming days, as traders react to more nervous sentiment and the USD/ZAR could prove very choppy.

The USD/ZAR is trading near the 17.00000 level as of this writing, as bullish speculation gets plenty of consideration.

The USD/ZAR is trading within sight of the 17.00000 with active price action abundant.  On cue in the midst of the storm created by Federal Reserve Chairman Jerome Powell on Friday, the USD/ZAR currency pair went from a low of nearly 16.71000 to 16.90000 without much hesitation. Via early transactions this morning the USD/ZAR has continued to move incrementally higher and is touching key psychological ratios near 17.00000.

17.00000 Could prove to be Lynchpin for Dynamic Movement in USD/ZAR this week

It may seem quite simple to say the 17.00000 is important psychologically, but having broken this ratio higher already in July and only last week, the USD/ZAR may start to create a group of ‘backers’ who believe the forex pair should be above this level fundamentally for the time being . Global market conditions remain nervous and last week’s Jackson Hole central bankers’ conference has done little to soothe the minds of financial houses.

Technically the 17.00000 has been punctured enough in recent memory to have created a framework of belief this level can prove vulnerable again.  If the 17.00000 level is toppled and the 17.05000 mark begins to be flirted with it could set the stage for another round of dynamic speculative buying. Only one week ago the USD/ZAR touched the 17.13600 mark. And in July the USD/ZAR traded above 17.20000.

Traders need to be prepared for the Potential of a rather Turbulent Week in the USD/ZAR

• The relative calm of August trading is likely to fully disappear in the coming days, as traders react to more nervous sentiment and the USD/ZAR could prove very choppy.
• Global conditions in Forex remain intense as a strong USD causes problems with a handful of emerging market currencies; the USD/ZAR is reflecting this whirlwind of results as it tests highs.

Speculators should not be overly ambitious in the short term.  Quick hitting trades which look for realistic targets may prove to produce the best results in the near term. If sustained trading takes place above the 17.00000 level this will spark intrigue for the USD/ZAR and could allure more bullish sentiment.

However, the USD/ZAR will need to sustain value above the 17.14000 ratio in order to build a strong surge higher which then tests July’s highs. If the USD/ZAR were to stumble to the 16.93000 to 16.87000 ratios it may be tempting as a place to ignite buying positions based on the notion more upside price movement will occur.

USD/ZAR Short Term Outlook:

Current Resistance: 17.04900

Current Support: 16.93200

High Target: 17.15800

Low Target: 16.81000

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The pair will likely keep rising as investors target the next psychological level at 0.7100.

Bullish View

• Buy the AUD/USD pair and set a take-profit at 0.7100.
• Add a stop-loss at 0.6900.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 0.6950 and a take-profit at 0.6900.
• Add a stop-loss at 0.700.

The AUD/USD pair rose to the highest level since June 17th after the Federal Reserve delivered another 0.75% rate hike on Tuesday. The pair has now risen by over 4.7% from its lowest point this month as investors bet that the US dollar index rebound may have peaked.

Federal Reserve Rate Hike

The Federal Reserve continued its extremely hawkish policy on Wednesday as the committee continued to intervene in a bid to reduce inflation. The bank hiked rates by 0.75% for the second time this year. This hike brought the benchmark interest rate to 2.50%, which was the highest point in years.

Bond yields diverged after the rate hike. Yields of the 10-year bond yields dropped to 2.77% while the 30-year rose to 3.03%. In Australia, the country’s 10-year bond yields declined by 2.40% in the overnight session.

In a statement, the bank said that the country was heading in the right direction. Recent data showed that the country’s unemployment rate remained at 3.7%. However, it warned that inflation remained at an elevated level. The statement said:

“The Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.”

Therefore, the spread between Australia’s and US interest rates is still wide. The Reserve Bank of Australia (RBA)  hiked interest rates to 1.35%. It will also continue hiking considering that the country’s inflation surged to 6.1%.

Meanwhile, data published on Wednesday showed that new home sales in the US declined while the trade surplus remained close to $100 billion in June. The next key catalyst for the AUD/USD pair will  be the upcoming US GDP data. Analysts expect the data to reveal that the economy expanded by 1.5% in the second quarter.

AUD/USD Forecast

The four-hour chart shows that the AUD/USD pair has been in a strong bullish trend in the past few days. The pair managed to move above the important resistance level at 0.6981, which was the highest point this month. It also rose above the 25-day and 50-day moving averages while the Relative Strength Index crossed the descending trendline.

The pair also rose slightly above the 50% Fibonacci retracement level. Therefore the pair will likely keep rising as investors target the next psychological level at 0.7100.

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