- The US dollar initially fell a bit during the South African Rand, to touch the 18 ZAR level, which of course gives you a little bit of a technical bounce due to the large, round, psychologically important figure.
- At this point, the market is likely to continue to see resistance above though, and with the Federal Reserve meeting on Wednesday, that could cause quite a bit of volatility as well.
Technical Analysis
Pay close attention to the 18.25 ZAR level, because not only has it been important previously, but we also have the 200 Day EMA sitting there. Furthermore, we also have the 50 Day EMA dropping from the 18.35 level above, getting ready to kick off the so-called “death cross.” All of this being said, there are a lot of questions to be asked about South Africa, because quite frankly it is in the crosshairs of the Donald Trump administration at the moment, so it’ll be interesting to see if the South African Rand has to pay for that.
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The interest rate differential favor South Africa, but that’s typical for this pair. Interest rates in America are higher than they typically have been over the last couple of years, but we are starting to see rates drop a bit in America, and that makes the USD/ZAR pair a little softer that it has been most of the year. If we can turn around and break down below the 18 ZAR level, then it’s likely that the market will continue to go much lower, perhaps the 17.65 ZAR level.
On a rally, it’s not until we break above the 18.40 ZAR level that I start to look at this as a buying opportunity. I would anticipate a lot of noise in the area just above, so this is more or less a “wait and see” type of set up.
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