USD/ZAR Forecast: US Dollar Bounces into Resistance Against Rand

• During the early hours on Tuesday, we have rallied a bit to show signs of life in the US dollar as we are testing the 18.25 South African Rand level (USD/ZAR pair).
• If we can break above there, then the market could go looking to the 50-day EMA, perhaps even the 200-day EMA near the 18.60 level.

If we break above the 18.25 level, I do think that there is a bit of a recovery just waiting to happen, but I also recognize that there is going to be a significant amount of market memory here, as we have seen so much in the way of support. The question now is going to be whether or not the US dollar is going to start shrinking against other emerging market currencies. We did give back quite a bit of the strength from the trading session on Monday, so the question now will be what happens with the gains on Tuesday you can make an argument at this point that perhaps we are seeing a bit of follow through. And if we do break above the 18.25 level, it just shows a massive amount of resilience.

Top Forex Brokers

1

Get Started 74% of retail CFD accounts lose money Read Review

However, I would direct your attention to the previous week because every time we rallied, we did see more selling pressure. Keep in mind that the interest rate differential isn't what it once was, but there is still a significant gap if you are willing to hang on to a currency for interest, South Africa is a viable one. All things being equal though, I do think that if we get a sudden risk off move, that puts the South African Rand and other emerging market currencies at extreme risk against the US dollar.

Pay Attention to EM Currencies

I believe at this point in time, you need to be paying close attention to emerging market currencies, because they all do tend to move in the same direction. So having said that, pay attention to the Indian rupee, the Indonesian rupiah, Chilean peso, Mexican peso, and all of the other usual suspects. As a general rule, the US dollar does tend to move in the same direction against the whole basket of smaller currencies.

Ready to trade our daily Forex forecast? Here’s some of the best trading platforms in South Africa to check out.