- As of this writing the USD/ZAR is near the 19.16600 ratio, and the currency pair saw a high around the 19.39420 mark on Friday the 23rd of February.
- Simply put it has not been an optimistic month of trading for the South African Rand.
- While the USD has caused plenty of pain in Forex because of its strength the past two months, the USD/ZAR is also showing signs of increasing nervousness due to economic concerns mounting in South Africa which are affecting the currency pair.
Other major currencies paired against the USD have been able to produce relative equilibrium in February; in recent trading many currencies have even produced solid reversals showing that price action is not a one way avenue. Yes, there are fluctuations in the USD/ZAR and the currency pair does have the capability to create bearish momentum, but the upwards climb produced the past week has likely set off additional alarm bells in financial institutions.
Sustained Trading Above the 19.00000 Ratio in the USD/ZAR
The ability of the USD/ZAR to trade with strength above the 19.00000 level is a bad sign for the South African Rand. Once again the currency pair is flirting with highs that are considered perilous for businesses in South Africa that must acquire USD. The USD/ZAR has touched values in the last week which were hit in October of 2023. As February comes to a close and March gets set to begin, financial institutions are not resting easy regarding their outlooks for the South African Rand.
Speculators who believe the USD/ZAR is overbought could be proven correct. The ability of the currency pair to trade in a correlated manner with the broad Forex market certainly still exists. However, there is a growing fear the South African Rand is leaning towards more weakness because of fiscal problems in South Africa due to questionable policies, corruption and outright mismanagement of government affairs. The national election in South Africa will be on the 29th of May.
The Month Ahead and Concerns for the USD/ZAR
The economic situation in South Africa is not going to improve over the mid-term. The question for day traders is how financial institutions will continue to react as they try to handle the nervous sentiment which is being generated among their clients who must trade the USD/ZAR. While a high of 19.39000 might seem like a high that could prove to be durable regarding resistance in the days and weeks ahead, speculators know from experience the USD/ZAR has traded at higher values. Nervous behavioral sentiment is becoming the dominant feature of the USD/ZAR, and for the currency pair to return to a bearish track large players’ need to become more tranquil.
- USD centric trading could lead to some selling of the USD/ZAR, but the currency pair remains under a questionable ‘light’ due to economic issues in South Africa.
- Traders of the USD/ZAR should use solid risk management at all time because of its recent volatility which shows signs of growing more volatile.
USD/ZAR Outlook for March 2024:
Speculative price range for USD/ZAR is 18.71000 to 19.65000
Speculators who want to bet on downside being created in the USD/ZAR cannot be faulted; this because the currency pair has certainly traded at lower values recently and over the long-term has shown a capacity to reverse lower with sudden strength. However, wagers looking for downside momentum should not be overly ambitious and traders should use take profits that cash out winning positions should they develop.
Traders who have the desire to pursue an upwards trajectory in the USD/ZAR must be careful too. The ability of the USD/ZAR to trade higher has been demonstrated, but resistance levels have produced rather swift declines too. The coming month may produce choppy trading results for the USD/ZAR and there is a potential the currency pair may start to correlate in a healthier manner with the broad Forex market. Short-term traders of the USD/ZAR must acknowledge the currency pair is dangerous because of the mix containing domestic worries in South Africa and the tendency to still move in a correlated manner to broad Forex price action via USD outlooks.
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