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The surprise hike from the ECB last week sent another cold shiver into global Forex and U.S Treasuries and proved financial institutions remain fragile and may continue to simply buy high-yielding U.S bonds, which makes the USD stronger.
The USD/ZAR is trading fractionally above 19.00000 early this morning, after starting today with some selling downwards which created an early low around the 18.92900 mark momentarily. However, this is not the full story. The USD/ZAR was trading close to 18.75540 on Thursday, which was challenging prices not seen since the 4th of September.
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And then a rather dramatic thing took place on Thursday that financial institutions were not expecting, the European Central Bank raised its interest rate. Suddenly like a bolt the USD/ZAR jumped higher and was trading near the 19.05800 level, and the currency pair climbed more on Friday touching the 19.10800 vicinity before calming down a bit and selling off slightly before going into the weekend.
Some readers may be asking what the connection to an interest rate hike from the European Central Bank has to do with the USD/ZAR. It is a good question and the answer is that the ECB’s surprise interest rate hike has put all financial institutions into a nervous state because the U.S Federal Reserve will release their Federal Funds Rate and FOMC Statement this Wednesday.
While few believed the Fed would raise their interest rate in a few days, behavioral sentiment certainly has been made more anxious. Trading in the broad Forex market including the USD/ZAR will remain rather sensitive over the near term and technical levels such as 19.00000 will be watched closely.
While the 19.00000 level and above for the USD/ZAR may ‘feel’ overbought, experienced traders know the currency pair has traded above these levels before. The surprise hike from the ECB last week sent another cold shiver into global Forex and U.S Treasuries and proved financial institutions remain fragile and may continue to simply buy high-yielding U.S bonds, which makes the USD stronger.
However, some speculators with slightly longer viewpoints may believe that at some point the Fed cannot continue to be aggressive. However, U.S inflation reports last week did come in stronger, and Retail Sales were higher than expected.
- The 19.00000 USD/ZAR level will continue to work as a barometer in the short term.
- Quick-hitting trades today and tomorrow should be practiced to make sure a wager is not killed by unexpected and unprotected price momentum in the wrong direction.
- The zone of 18.90000 to 19.10000 seems like a logical technical range that might be demonstrated over the next day or so, but expect this ‘safe’ realm to disappear rapidly on Wednesday.
Current Resistance: 19.02990
Current Support: 18.98900
High Target: 19.09600
Low Target: 18.92300
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