The US dollar has fallen against the South African Rand again on Friday, as we continue to see the carry trade play out here. That being said, I am looking to sell all rallies here.
USDZAR
The US dollar has fallen against the South African Rand during trading on Friday as we head into the weekend and see a certain amount of hesitation out there when it comes to owning the greenback or maybe more succinctly put going against the carry trade. The carry trade is of course a situation where you buy currency that pays you at the end of the day much more interest than the ones you borrow in.
With this you have a situation where you get paid at the end of every day, you hopefully get a nominal gain as well and typically you will in the forex markets and right here is a perfect example. The interest rate differential between South Africa and the United States is fairly strong and therefore it makes sense to own the South African Rand not only because you get paid at the end of every day but you also have a commodity market out there that continues to be very important.
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Commodity Market Drivers and Technical Support
The commodity markets showing a lot of bullish behavior will continue to be a major driver and I think because of this the South African Rand is likely to continue to be attractive. We are currently hanging around the 16 level, but I think we could go a little bit lower, maybe as low as 14.5 before it's all said and done.
That doesn't mean we get there overnight and recently we've had a nice little bounce. However, this bounce was just a bounce in a longer-term downtrend. We tested the 50-day EMA during the early part of the session and then simply crumbled from there. Most carry trade pairs are doing fairly well right now as they tend to do over the longer term, so I remain short.
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