FXTM information and reviews
FXTM
95%
OctaFX information and reviews
OctaFX
94%
XM information and reviews
XM
93%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
91%
HFM information and reviews
HFM
89%

Short sellers ready to loot the South African rand?


14 July 2021

Where to next for South Africa? Take a read below to find out more. The rand had been heading in the right direction, strengthening against the dollar all the way down from its 19 level blow off top back in April 2020. There were a couple of factors helping the rand recover its losses. 1) In a world of compressed yields, investors went searching for higher interest rates and SA offers some of the most attractive carry in the world 2) SA is a big commodities exporter and with prices surging on this front, their terms of trade improved significantly 3) Positive developments around shoring up the ailing State Owned Electricity Company, Eskom’s balance sheet as debt was reduced by about a fifth. 4) A relatively resilient and less restricted economy.

So what is the explanation behind the weakness we’re seeing now? Two things. 1) The extreme looting and disorder we’ve seen across South Africa in response to the arrest of former President Jacob Zuma is seeing a risk premium slapped back onto SA by currency traders 2) The US Central Bank (Fed) is beginning to go down the path of policy normalization. Yesterday saw a very punchy inflation print which only adds fuel to the fire in terms of expectations around tightening by the Fed.

The other problem is a very slow vaccination rollout as SA enters their 3rd wave. Vaccine centers have also had to temporarily close as a result of the widespread violence. It’s upsetting to see my place of birth getting torn apart - my hope is that this is a temporary phenomenon to be faded and order is soon restored. Although, transaction costs tend to be higher for the USDZAR, when you have an Average True Range reading of circa 2000 pips there’s plenty opportunity for traders to take advantage of the volatility. Options traders see an 81% probability that the rand will slide to 15 per dollar this quarter.

Preview

Looking at the technicals, price is sniffing around the 200-day SMA, which will be a key level for USDZAR in the coming days. A breach of this could see a fast sell-off as stops are triggered and bring 15.50 into play. Price broke out of the mini range between 14.42 and 14.12 that it had been in for almost a month. The downtrend line from the highs of March/April 2020 has also been breached. The RSI is close to overbought, but can clearly become even more overbought should conditions deteriorate.

The 21-day EMA continues to provide dynamic support to price on the upside. For a pullback I’d monitor the 14.42 former range resistance as a price target. The momentum, however, currently remains towards further weakening in the rand.

#source

Share: Tweet this or Share on Facebook


Related

Dollar flat as market braces for central bank decisions later in the week
Dollar flat as market braces for central bank decisions later in the week

The dollar was up modestly in early trading in Europe on Monday, at the start of a key week for central bank meetings on both sides of the Atlantic. By 03:00 ET (08:00 GMT), the dollar index...

30 Jan 2023

Mega Central banks, OPEC, NFP & Earnings week
Mega Central banks, OPEC, NFP & Earnings week

China Stock market returns from Luna New Year break. Chinese stocks rose while most other Asian equities fell as investors looked to interest rate decisions scheduled this week in the US...

30 Jan 2023

XAU/USD remains on the defensive around $1,925 ahead of US PCE
XAU/USD remains on the defensive around $1,925 ahead of US PCE

Gold price remains on the defensive for the second straight day amid modest US Dollar strength. Thursday’s upbeat US macro data fuels hawkish Fed expectations...

27 Jan 2023

XAU/USD retreats from multi-month top amid modest USD recovery, ahead of US GDP
XAU/USD retreats from multi-month top amid modest USD recovery, ahead of US GDP

Gold price pulls away from a fresh multi-month top amid a modest US Dollar strength. Bets for smaller rate hikes by Federal Reserve, recession fears should help limit losses...

26 Jan 2023

Microsoft: Still Trapped Within Descending Channel
Microsoft: Still Trapped Within Descending Channel

Microsoft Corp., an American multinational technology conglomerate currently ranked the third largest company by market capitalization ($1.728T) which actively engages...

24 Jan 2023

Same story new week
Same story new week

Chinese New Year celebrations – many centres are closed in Asia. Treasuries sagged to end on a bearish week. USDIndex at 101.30 low as the market continued...

23 Jan 2023


Editors' Picks

FXCM information and reviews
FXCM
87%
ActivTrades information and reviews
ActivTrades
86%
RoboForex information and reviews
RoboForex
85%
MultiBank Group information and reviews
MultiBank Group
84%
Libertex information and reviews
Libertex
83%
Vantage information and reviews
Vantage
83%

© 2006-2023 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.