The South African Rand began appreciating against the Japanese Yen mid-July when it reversed from the senior channel circa 7.88. The rate peaked at 8.55 a few weeks prior to heading back lower. The Rand is currently testing the 55-period (4H) and 100-hour SMAs near 8.40.
If this support cluster remains intact during the following hours, it is expected that the pair continues appreciating towards the upper boundary of the senior channel circa 8.65.The nearest resistance is the 50.00% Fibonacci retracement at 8.55. A bearish breakout from 8.40 is likely to send the rate down to the 200-period SMA and the monthly PP at 8.23.
This area is expected to cause a reversal to the upside and a subsequent surge. The upward-sloping tendency of technical indicators suggest that the bullish scenario is the more likely option.
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ZAR/JPY was consolidating for a few weeks in the 8.20/55 range prior to plunging more than 12.00% last week. This strong decline was strengthened mid-Friday when the South African Rand fell 5.40% against the Japanese Yen in just two hours alone—a move which was caused mainly by investors fleeing to the latter as a save-haven currency. As a result, the rate made a false breakout from the senior channel, but nevertheless had returned back in this pattern the same day.
The Rand is gradually recovering from the aforementioned plunge. Technical indicators demonstrate that there is still some upside potential in the market that bulls may still employ this week.
Apart from the 100– and 200-hour SMAs, a more probable upside target is the 8.30 area where the 55-, 100– and 200-period (4H) SMAs and the monthly PP are located.