- The USD/ZAR is traversing the 18.68520 vicinity as of this writing on the last day of April.
- Only a handful of days ago the currency pair was near the 19.26000 ratio.
- The downwards move in the USD/ZAR has correlated with the broad Forex market as the USD has lost some strength against many major currencies.
- The USD/ZAR notably hit the 18.42000 to the 18.41400 vicinities on the 9th and 10th of April. However, within nearly a week on the 19th of April the USD/ZAR was around the 19.39000 ratio momentarily.
The detailed price action in the USD/ZAR in many respects does match the volatility seen across global Forex in April. Choppiness is likely to continue for the USD/ZAR in May because of concerns regarding the outlook of the U.S Federal Reserve. The Fed will make their monthly pronouncement tomorrow via their FOMC Statement. No change to the Federal Funds Rate is expected. Financial institutions which have been battered trying to figure out what the U.S central bank is going to do, likely have taken the approach that there will be no changes to U.S interest rates over the mid-term.
USD/ZAR Outlooks is Not Only about the U.S Federal Reserve
While traders of the USD/ZAR are looking at the U.S Fed like many others, experienced Rand traders also know to look within South Africa. As May begins day traders need to consider the dynamics of the South Africa election which will take place on Wednesday the 29th of May. The results are in question regarding the potential voting outcome. For the first time in decades the ruling political party African National Congress may have to form a coalition government in order. A variety of polls indicate eroding support for the ANC. Financial institutions will certainly react to the South Africa vote.
A chief concern for speculators is how the positioning of financial institutions will affect the USD/ZAR. The currency pair is suffering from volatility because of U.S Federal Reserve concerns, but is also brought under pressure because of misgivings regarding the current South Africa’s government which is not considered fiscally conservative. The USD/ZAR will move in a more volatile manner as the election draws closer. The price range of the USD/ZAR may start off May looking at the Federal Reserve, but by the middle of month it is likely that nervousness will begin to creep into the currency pair because of the South African election.
USD/ZAR Speculation and Short-Term Wagers
Because of the dynamics which will develop in South Africa and questions that will certainly be asked regarding leadership and potential minister roles regarding the economy and infrastructure that will develop after the election, concerns are legitimate. Speculators should make sure they keep their trades near-term wagers in order to guard against influences they cannot control. The ability of the USD/ZAR to stage a bearish trend the past handful of days after trading easily above 19.00000 is a good sign regarding correlation to the broad Forex market, but it is also a warning sign regarding volatility.
- Technical traders looking merely at charts should pay attention to domestic South Africa news, because any signs of concerns stemming from a lack of clarity regarding potential leadership changes will stir the USD/ZAR.
- Traders should not be overly ambitious regarding trends and be willing to use take profit orders to catch winnings which could suddenly evaporate.
USD/ZAR Outlook for May 2024:
Speculative price range for USD/ZAR is 18.37000 to 19.41000
The wide range of the USD/ZAR seen in April may replay in the coming weeks. However, for the first couple of weeks in May it does seem logical the currency pair will trade in a correlated manner with the broad Forex market. However, by the end of the second week in May, speculators should start to brace for the potential of nervous results starting to be seen in the USD/ZAR due to election concerns.
Support levels proved quite strong around the 18.41000 level in April, but is should be pointed out the currency pair did test the 18.20000 vicinity in early January of this year. However, traders should be on the lookout for potential reversals higher to develop which suddenly do not correlate to the broad Forex market. The price range of the USD/ZAR is likely going to become fast and dynamic as the South Africa election approaches.
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