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U.S. Dollar / South African Rand

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USDZAR trade ideas

Reassessment timeTime to reassess my position on the rand. I expected the 50-day MA rate of 17.15 to hold support for the pair during Wednesday’s turbulent session but Powell’s dovish comments regarding the Fed’s “successful fight against inflation” sent the dollar packing across the board. Equity markets staged an aggressive rally since Powell failed to decisively comment when questioned whether he was concerned about the stock market’s strong start to the year. The SPX and NDX have rallied roughly 2.67% and 5.76%, respectively, since Wednesday’s Fed rate decision. Risk-on sentiment certainly gripped the market in the past two session and the rand hopped on and rode the wave all the down to the 200-day MA level of 16.95. The break below the 38.2% green Fibo rate and the top of the green first impulse wave theoretically invalidates the 5-wave impulse higher towards 17.60 as previously predicted. A break and close below the green 61.8% Fibo retracement rate of 16.99 and the 200-day MA rate of 16.95 will allow the rand to pull the pair back onto the yearly low of 16.70, that is if the current risk-on sentiment is maintained. On the flip side a close above the 50-day MA rate of 17.15 will see the rand weaken back towards the resistance range of 17.39 and 17.50. The DXY pulled back most its gains yesterday following the FOMC demolishing of the greenback, so some rationality is coming back to the market. Given the current local uncertainties and easing of commodity prices, particularly platinum, I don’t see the rand holding the pair below the psychological level of 17.00. Technically the 4h MACD is losing momentum and looks set to cross to a buy signal and the RSI has bounced convincingly off the oversold zone which is rand negative. Don’t forget about today’s NFP’s print, it has the potential to move the markets later this afternoon.
by Goose96
12
Pre-fed 4H USDZARThe upward momentum seems to be fading as we await the open of the US session. The orange 23.6% Fibo retracement at 17.50 is a strong resistance and psychological rate for the pair and I don’t see it giving way before the major Fed event tomorrow. Over the slightly longer term I’m bearish on the rand after the pair broke above the key 50-day MA level at 17.15 and 17.30. A pullback seems to be on the cards as the 4H RSI is topping out just under the overbought zone and the buy signal on the MACD is losing momentum. The pullback will likely see the pair slide into the range between the green 38.2% Fibo retracement rate at 17.18 and the 23.6% Fibo retracement rate at 17.30. The rate at 17.30 will also swing from a previous resistance to a support. (I’m personally planning to leave a few buy limit orders scattered in this range). Given all the market moving data releases and Central bank announcements I suspect we could see the rand weaken towards the range between 17.60 and 17.70. A break above this resistance range will allow the pair to climb higher towards the blue 61.8% Fibo retracement rate of 17.84. (I'll drop the daily timeframe chart in the comments below for context regarding the Fibo retracements levels I'm using) Also see attached my idea for the DXY as we prepare for Fed week!
Long
by Goose96
6
The Rand in the rocky credit markets The economic calendar is wild this week so I thought it would be best to do a deep fundamental dive into the USDZAR . All the attention will be on the Federal reserve tomorrow and whether or when they will pause their rate hikes. We need to look past the hype around the interest rate and the “pivot" narrative. Focus should however be on how the markets will cope with the Fed’s liquidity drain and how it will impact the future price of money ( ie . Interest rates). Before we kick-off, correlation does not imply causation... I’ll start by explaining the chart you’re looking at. What you’re seeing is the positive correlation between the USDZAR and the difference between the South African government bond 10-year yield (ZA10Y) and the US 10-year treasury yield (US10Y). The interest rate differential is referred to as the carry trade potential. Investors can borrow money on the cheap from developed low-risk markets and invest the borrowed money in riskier destinations to earn more interest. The interest rate difference is then pocketed by the investor. The preferred vehicle to capitalise on the interest rate differentials between two locations are government bonds (they are low risk and liquid). The reason for the positive correlation between the USDZAR and the bond yield differential is because when there is risk-on sentiment in the market, investors tend to move funds out of the safety of US treasuries and into riskier assets. The sell-off in US treasuries causes US10Y yields to rise (decreasing the bond yield differential), and the rand tends to appreciate in risk-on phases of the market, citrus paribus. (Decreasing bond yield differential; USDZAR decrease due to rand appreciation). Conversely, when investors are risk-off they run to the safety of US treasuries. The buying of US-treasuries lowers the US10-year yield which increases our bond yield differential. We all know how rapidly the rand can depreciate in risk-off phases when the liquidity wave pulls back to the US, leaving the rand on the rocky shore. (Increasing bond yield differential; USDZAR increases). Our strong correlation however weakened in August 2022 when the US 10-year yield rocketed higher after the Fed started their hiking cycle. Let’s zoom in on the Fed since its Fed week. The most important chart in the market , the Fed’s balance sheet: www.federalreserve.gov . The Fed has so far tapered roughly 5.52% off its balance sheet since April 2022. The Fed is selling treasuries to taper its balance sheet and to soak up liquidity from the market (if there will be enough buyers, only time will tell). This is rand negative. Now let’s get to where all this week’s focus will be, the Fed’s interest rate decision. The Fed is expected to slow its rate hikes to 25bps this week and push rates from 4.50% to 4.75%. The Fed tends to follow the US02-year yield (US02Y) as guidance on its interest rates and it seems as if the US02-year yield has topped out between 4.75% and 5.00%. The Fed pause seems near, and the latest inflation figures from the US supports the narrative that the Fed has managed to cool inflation. The most concerning thing in the market currently is the inverted yield curve: History doesn’t repeat itself, but it rhymes. For the Fed to normalise the credit markets it will have to pause rates. That is usually when something the market breaks and the Fed is forced to cut rates and inject liquidity into the markets. When the Fed pushes easy money ( QE or whatever buzz phrase they'll use) into the market investors rotate from longer dated bonds to shorter dated bonds. To conclude, if and when the Fed pauses its rate hikes, the US10-year yield will melt higher which could be rand positive based off our correlation analysis. Just have popcorn (and gold , silver and other real assets) ready for when the Fed is forced to cut rates/ pivot because that will be caused by arguably the biggest credit market implosion in the history of fiat money. To end off I leave you with the words of Zoltan Pozsar: "commodities are collateral, and collateral is money."
by Goose96
USDZARHello guys so last week I didn't give a trade call because we've been patiently waiting for the market to give us a trade signal but it didn't. Although did get a trading opportunity from this pair but I didn't share it because I wasn't too sure about it. But I'm totally sure about it guys. Guys the market will only reward the patient and the skillful so we are still waiting and I've not given up on trading yet😂😂😂😂😂 as some might be thinking. But this week the market should give us some trading opportunities as fundamentally we see a boom in the crypto market and from correlation we see that when there is an increase in this markets, that means the US Dollar isn't doing well. But what makes technical analysis beautiful is that when it's time to buy we buy and when it's time to sell we sell. So we're gonna be patient as the market only rewards the patient. VHT your mentor signing out ✌️ ✨️
Short
by Victor_Hunter_Turner
2
Hi guys ITS MAGIC LINE here WITH USDZAR Analysis 01/26/2023Just as usual im going to make this short and precise ...(SELL>USDZAR) USDZAR is currently trading around 17.1826 & 17.2650 range which is one of the 2 major areas where smart money is looking to short the PAIR going down TARGETING 16.8889 & 16.7300 AS their 1st & 2nd TP target PLEASE NOTE FOR THOSE WHO ARE GOING TO TAKE THIS TRADE MAKE SURE TO COVER YOUR POSITION BEFORE TOMORROWS CLOSE AS WE ARE NEARING INTREST RATE DECISION FROM THE FEDS ... BUT TREND WISE THE RAND IS IN A DOWNTREND NB Analysis only FOR DAY TRADERS with fat accounts that are willing to hold their trades for a day or 2
Short
by fidelityforexGroup
USD/ZAR. Big data expected to bring big movesThe rand managed to pull the pair to a daily close below the 50-day MA, yesterday, off the back of a broadly weaker dollar. There was no data driving the weakness in the greenback but it seems the weakness is stemming from the “plausible soft landing” narrative and the stable decline in US 10-year bond yield since the beginning of the year. Today’s calendar has the potential to kick-start a fresh trend on the USD/ZAR pair. The 50-day MA, currently at 17.14, has acted like a magnet these past 5 trading sessions with no clear break as of yet. The 200-day MA at 16.91 is creeping higher and will serve as a key support rate in today’s potentially wide range session. The 200-day MA also coincides with the neckline of the blue channel. Events for the day: The SARB will announce their first interest rate decision today and it is widely expected that the bank will hike rate by another 50bps up to 7.50%, no real surprises there. The SARB will stick to their hawkish stance as SA inflation (7.500%) still sits stubbornly above the 3-6% target range. The volatility will come from the US GDP print for 2022Q4. QoQ growth is expected to print 2.6% down from 3.2% in 2022Q3. It is becoming increasingly difficult to gauge how the markets will digest macro data releases but a print below expectations will be dollar positive as it will dent the “soft landing” narrative while a higher-than-expected print will add fuel to the risk-on fire in my opinion. Scenarios: 1. Stronger than expected US GDP: USD/ZAR to break below the 200-day MA and possibly test the current yearly low of 16.70. 2. Weaker than expected US GDP: Confirmed break above the 50-day MA to push higher and test the resistance range between 17.39 (blue 38.2% Fibo retracement) and 17.50 (orange 23.6% Fibo retracement rate). I’m personally favouring this scenario, but it obviously depends on how they cook the data haha. Technical indicators: Bullish divergence is still present on the RSI (rand negative). The MACD indicator is still holding a daily buy signal, but its momentum has pattered out this week, but the buy signal is still rand negative. The DXY is also hovering in a strong support range and its weekly RSI is nearing oversold levels which may support the greenback in the weeks to come (see the attached snippet)
by Goose96
2