- The US dollar weakens against the South African rand after breaking below 17 ZAR, driven by commodities and favorable rate differentials.
- Despite choppiness, the broader trend remains lower, with downside targets still in focus.
The US dollar has been very noisy against the South African rand on Friday, which is not a huge surprise considering that the US dollar has been fighting back against a lot of the major currencies around the world that are followed at Daily Forex. That being said, you will remember a couple of days ago an analysis of the US dollar against the South African rand suggested that if we start to break down below 17 ZAR, the market could really start to unwind. And that is what we have seen so far.
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This is a market that I think could continue to be negative for the US dollar in general, mainly due to the fact that South Africa has a whole set of other factors to think about beyond what you might think about when comparing the US dollar to the euro or the British pound, for example.
Commodities and Rate Differentials Drive the Trend
After all, South Africa has a lot of gold. It also has a lot of other hard commodities that are all in extreme demand at the moment. So that is part of what has helped this pair drift lower. Beyond that, you also have the interest rate differential favoring the South African rand. And that will continue to be the case as rates were cut by the Federal Reserve and probably will be again one or two times next year.
If that is going to be the case, then the overall downward trend still persists, but this is a choppy pair. So a little bit of bounce and maybe selling pressure near the 17 rand level probably has the market selling off again. Alternatively, if we just break down from here, then the 16.50 ZAR level is where this pair is expected to go.
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