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USD/ZAR Forecast: Rand Recovers as Military Called In

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

South Africa will probably continue to suffer even if the violence were to stop, because the billions of rand in damages to the infrastructure will not be changed or turned around anytime soon.

The situation in South Africa has certainly seemed to be deteriorating the overall attitude for the currency as of late, but the last couple of days have been a little bit of a reprieve. Part of this is due to the local government calling of 25,000 reserves from the Army to help quell some of the unrest that we have seen throughout the country.

That being said, the South African rand is a little bit of a different situation right now than many other emerging market currencies, because even though there are a lot of concerns about the global economy out there, the reality is that South Africa is the only place we see right now that is getting out of control. In that sense, if emerging markets continue to fall, the South African rand is going to get the worst of all of the negativity out there. Furthermore, the United States dollar has been rallying for some time, and I have seen that across multiple assets and currencies, so the fact that we have bounced should not be a huge surprise.

Looking at the most recent trading, we continue to dance around the 14.50 rand level, an area that has been important multiple times in the past. If we can turn around and break above the 15 rand level, then I think that the market has the momentum on its side, and we should continue to go much higher over the next several weeks. On the other hand, if we were to turn around and break down below the 50-day EMA, we will challenge the 14 rand level, and if we were to break down below there, the pair would almost certainly break down towards the lows again that sit just below the 13.50 rand level.

The biggest problem you are going to have with this currency right now is that it is moving on the latest headlines coming out of South Africa and the rioting that has been going on there. Nonetheless, I suspect that South Africa will probably continue to suffer even if the violence were to stop, because the billions of rand in damages to the infrastructure will not be changed or turned around anytime soon. Because of this, I think it is only a matter of time before we break above the 200-day EMA and go much higher.

USD/ZAR

Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

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