- The success of the USD/ZAR bearish trend in the month of May was notable.
- The currency pair demonstrated solid selling trajectory and touched a low of nearly 18.02995 on the 21st of May.
- The track lower for the USD/ZAR began in many respects in the third week of April after a high around the 19.38665 ratio was challenged on the 19th, and then with healthy choppy results began to fall in value and by the 1st of May was near 18.52220 mark.
However, the USD/ZAR always proves complex and the results the past week in the currency pair have seen buying of the currency pair reemerge. At the time of this writing the USD/ZAR is near the 18.54350 mark with very fast fluctuations being exhibited. South Africa held its national election yesterday and the outcome is likely not going be known and final until this Sunday the 2nd of June. Financial institutions will certainly show nervous behavioral sentiment until they know the outcome of the election. There are around 28 million registered voters in South Africa and turnout of voters yesterday has been reported around 66%.
USD/ZAR Near-Term Unknowns and Potential Volatility
The USD/ZAR has seen upwards momentum early this morning which has essentially brought the currency pair above its starting price levels which began the month of May. The high for the USD/ZAR was touched on the 8th of May when the 18.67585 vicinity was seen. The USD/ZAR has enjoyed a remarkably solid month of bearish strength and momentum, but the past week as the national election began to draw closer the currency pair certainly began to show nervousness.
While USD centric sentiment seems to remain within a weaker stance due to financial institutions shifting their outlooks to a potentially dovish Federal Reserve, these viewpoints have not become rock solid yet. Tomorrow the U.S will issue important inflation data via the PCE Price Index which the U.S Fed uses an important gauge. The report will impact the USD/ZAR, but in the short-term the currency pair may actually trade more according to the sentiment being generated via whispers and news regarding what the South Africa election results may deliver. As the month of May ends the USD/ZAR could prove volatile.
USD/ZAR Risk Management and Patience Needed
The potential that an outcome for the voting in South Africa will not be officially known until this coming weekend sets the stage for a rather incredible week of trading for the USD/ZAR starting on the 3rd of June, this as financial institutions react. If a trader wants to wager on the outcome of the election they can certainly do so, but they should also remember there is a possibility a coalition government may have to be formed in South Africa, which is something financial institutions are in the nation are not accustomed.
- The price range of the USD/ZAR near-term and into next week could prove fast and dangerous.
- Depending on the outcome of the vote, behavioral sentiment in South Africa and globally regarding the USD/ZAR will turn reactionary and betting on direction could prove difficult.
- A result which suggests a hard-left coalition may have to be formed politically could create a shockwave and create nervous buying of the USD/ZAR.
- A coalition of the ANC with a perceived moderate political party would help the USD/ZAR settle back into a correlation with USD centric notions.
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USD/ZAR Outlook for June 2024:
Speculative price range for USD/ZAR is 17.97000 to 19.10000
Traders should not forget that the U.S Federal Reserve will also issue its FOMC Statement on the 12th of June, which will certainly create more price velocity in the USD/ZAR. If the Fed talks about the potential of a summer time interest rate cut because inflation is showing signs of eroding, then the USD/ZAR could see more selling impetus.
The currency pair is set to display a lot of nervous sentiment over the next week and the unknowns should make day traders very cautious as they wager on the outcome. If news from South Africa sounds positive for financial institutions the USD/ZAR could retest lows seen in May and go to new depths. If news developments sound confusing and potentially troubling, the USD/ZAR may establish a higher price range in the coming week and be tested thereafter.
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