- It’s obvious that the market has nowhere to be, and quite frankly I think we continue to see a lot of support and resistance at the same level as we have been paying attention to for several months.
- Keep in mind this is a currency pair that is not free-floating, so it’s not a huge surprise to see it do almost nothing, as the central bank in Pakistan will keep the market from truly taken off.
In fact, it’s very difficult to trade this currency pair, and if you are in the West, the easiest way that I know of is through a futures contract on the ICE exchange. It trades for a very limited amount of time, but it’s typically used by commercial traders that have an interest in the manufacturing of clothing. Pakistan has a huge amount of T-shirt makers and the like, so this somewhat moves with cotton, but not really as the central bank doesn’t allow it to move too much.
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Stability and Price Controls
As the Pakistani economy is not a major economy, the fact that the Pakistani rupee is controlled by the central bank and only allowed to move so much is not a huge issue. In fact, their neighbors the Indians do the exact same thing. However, India is a much larger economy, and a free-flowing Indian rupee makes more sense. In fact, that’s probably coming before it’s all said and done. However, the Pakistani economy is so potentially fragile that it makes more sense for large players to simply ignore the fact that the currency is not free-floating.
As things stand right now, the market seems to see a lot of resistance at the 279.50 PKR level, with the 277.50 PKR level offering massive support. All things being equal, I think that the USD/PKR market will continue to see a lot of noise, but it’s in a very tight range so you need to keep that in the back of your head.
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