In general, I do believe that this is a “buy on the dips” type of market because the US dollar has been showing so much stronger overall.
- The USD/ZAR has gone back and forth during the trading session on Thursday, as we continue to see a lot of bullish pressure overall against the South African Rand.
- This does make a certain amount of sense considering that the emerging market currencies in general are having troubles.
- That being said, we are struggling to break above the 18.60 Rand level cleanly, and it does look like we have a bit of a fight on our hands.
The short-term pullback should continue to attract a certain amount of attention, and I also believe that the 18 Rand level will be an area that could bring in a lot of buying pressure as well. We have the 50-Day EMA racing towards that area as well, so that could come into the picture, as we continue to see more upward pressure in yields in America. Furthermore, you have to keep in mind that it takes a certain amount of risk appetite to buy South African assets. Beyond that, South Africa is highly levered to the commodity markets in general, so therefore if commodities struggle, as a general rule so will South African equities, and in this case, currencies.
If we do break out cleanly to a fresh, new I, then it’s probably only a matter of time before the US dollar goes looking to the 19 Rand level, followed by a potential move all the way to the 20 Rand level. Breaking down below the 18 Rand level could open up a pretty significant move lower, perhaps down to the 17 Rand level, which is an area we had seen a lot of buying pressure previously. Either way, expect a lot of volatility because quite frankly all Forex pairs are suffering a lot of volatility at the moment as there is so much uncertainty around the world.
In general, I do believe that this is a “buy on the dips” type of market because the US dollar has been showing so much stronger overall. Of course, as long as we continue to see a lot of noise out there about higher interest rates in the United States, perhaps even in quicker succession than originally thought, it does make a certain amount of sense that the greenback continues to attract a lot of attention.