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SOUTH AFRICAN RAND / U.S. DOLLAR

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ZARUSD trade ideas

USDZAR - the rand finding friends hard to come by The ZAR (South African rand) has come up on the radar as sellers have dominated and a true buyers strike ensues. We’re seeing longer-dated South African govt bonds sell off aggressively, with yields on 25yr government debt rising above 12.5% and the highest levels since 2020. The energy shortage continues to take a toll on economics and talk of increasing stagflation risks will typically attract currency sellers – the April CPI print (due 24 May) could be important in determining if the SA central bank (SARB) is indeed ready to pause in its hiking cycle, with SARB policy meeting due 25 May. Geopolitical issues are also weighing to an extent with the US ambassador to SA accusing the country of supplying arms to Russia. Favour buying weakness in USDZAR into 19.05.
Long
by Pepperstone
Q. Why when the FED raises interest rates does the rand weaken?A. Whenever you think about a country raising interest rates, we need to consider what happens to investors and where they are more likely to deposit their money. So, as we are expecting an increase in interest rates this month from the FED, there are a few reasons why we can expect the rand to weaken further: Here are three to consider… Reason #1: Investors flock to the US Dollar When the US Federal Reserve raises interest rates, it becomes more attractive for investors to hold or buy US-dollar denominated assets. That’s because they know they’ll receive a higher rate when they invest in it. This will also lead to a rise in the US dollar and a drop in smaller currencies (like the rand). Reason #2: US Dollar is still the fat cat of reserve currencies A rise in US interest rates may lead to higher borrowing costs globally. This is because the US dollar is still the world's primary reserve currency. When we think of gold, Bitcoin and other precious metals, we think of how it’s priced in US dollars. The problem with this, is that emerging market countries, like South Africa, will face higher debt-servicing costs as the US interest rates continue to move up. And this could continue to put pressure on their economies which will lead to a depreciation in the rand. Reason #3: South Africa is still a big exporter Also, South Africa remains one of the major exporters of commodities. And the value of the rand is linked to fluctuations in commodity prices. So, when US interest rates rise, this leads to a stronger US dollar. And can cause commodity prices to drop (as they are generally priced in US dollars). As South Africa is a major commodity exporter, the lower commodity prices would have a negative impact in SA’s export revenue – which can in turn weaken the rand further.
Education
by Timonrosso
1
Pre-FOMC; When in doubt, zoom out.It is guaranteed to be a volatile week given the stacked economic calendar. Tonight, the Fed is expected to hike interest rates by 25bps, and on Friday we have the always highly anticipated US non-farm payroll data. As per my previous idea, I got the timing wrong for my expected move to 18.55 but I’m still holding my buy orders in placed around the 18.21 level which coincides with the 50-day MA and the black 61.8% Fibo retracement rate. The rand was on the backfoot yesterday which saw the pair push up into the red resistance range between 18.50 and 18.55. The dollar is however weaker across the board this morning which is allowing the rand to pull the pair lower towards the navy-blue downward channel’s neckline. It seems as if the pair broke out of this downward channel but don’t rule out a retest of the upper neckline of this channel (support range between 18.28 and 18.33). A break below this support range will allow the pair to re-test 18.21. 18.21 is a critical support level, a break below will invalidate my expected move above 18.55 and will allow the rand to pull the pair into the blue support range between 18.00 and 18.10. The resistance rates to watch sit between 18.50 and 18.60. A break above this range will confirm my expected 5-wave impulse and the test of the yearly high at 18.71. The daily indicators are rand negative. The MACD is holding a buy signal while the RSI still has plenty room to move higher before sliding into overbought ranges. Fundamentals (latest US data prints): The writing is on the wall for a stagflation environment over the next 3-5 years. The latest US GDP print for the 1Q2023 came in at 1.1%, down from 2.6% QoQ. It is clear that the US and the Fed won’t avoid a recession or the “soft landing” bs they refer to. But wait there’s more, the recent interest rate cycle has not managed to contain inflation, gasp, with the latest PCE price index rising by 4.2% in 1Q2023, up from 3.7%. A low growth inflationary environment does not bode well for risk assets such as the rand and the recent fragilities in the US banking sector will only increase investor risk-off sentiment. All these factors are rand negative. Zooming back to the present, yesterday’s trading saw the DXY close lower after it touched a three-week high of 102.409. The DXY is firmly on the backfoot this morning and is currently back below the 102 handle in the lead up to the Fed hike. There were also some peculiar moves in the US bond market in yesterday’s session in the lead up to today’s Fed rate decision. US bond yields cratered as the US 10-year yield fell from 3.575% to 3.429% while the shorter dated 02-year yield fell back below 4%.
Long
by Goose96
USDZAR update pre-US GDP resultsThe pair is currently testing the top of the blue downward channel. A break above 18.40 will allow for a move higher north of 18.50 while a break below 18.21 will invalidate this move higher. I’m personally positioning myself for more rand weakness and a move north of 18.50 given the current risk-off back drop. My strategy is to place buy limit orders around the 18.21 support rate (small green box). I doubt the pair will break above the downward channel in today’s session given the highly anticipated US GDP results which will only be released tomorrow. SA markets will also be closed tomorrow which will increase the volatility in the pair’s price action. In my previous USDZAR idea I predicted that the pair would climb higher to test the resistance rate around 18.50 if it were to break above 18.33. The resistance rate at 18.33 however held its ground and the pair fell below the support rate of 18.11 which invalidated my previous idea. Since then, the rand managed to pull the broad-based weaker dollar all the way down onto the psychological rate of 18.00. The pair bounced aggressively off the 61.8%n fibo retracement rate of 18.01 in the last week which is indicative of a double bottom at this rate and the start of a 5-wave impulse. Fundamentally it's difficult to gauge the risk sentiment in the markets but the action in yesterday’s session is pointing to a fear trade. The both the US02year and US10year yield fell more than 10 basis points while the DXY climbed roughly 0.6% in yesterday’s session. This rush towards the safety of the bond market was largely driven by weak earnings results from the US banking sector. Tomorrow’s US GDP results will be imperative to the Fed rate hike expectations which seems to be fading given the fragilities in the US banking sector and the ongoing US debt ceiling debacle. Given this backdrop risk-off sentiment seems to have the upper hand which is rand negative. There are however some rand positive factors. The first is the SARB’s aggressive inflation fight. The SARB released their monetary policy review yesterday and inflation expectations remain well above the SARB’s 3-6% target band. This means the SA repo rate will remain high even after the SARB’s aggressive cumulative 150 basis point hike from the past three MPC meetings. The SARB’s nominal repo rate is currently at 7.75% which is rand positive given the carry trade appeal it creates for the rand. Another positive factor is the strong platinum price which has risen roughly 25% since February this year. High commodity prices strengthen the SA trade balance which is rand positive (the rand tends to behave like a commodity currency). In terms of technical indicators, the daily MACD indicator has crossed to a buy signal and the RSI, currently at 56, has room to move higher before hitting overbought zones. The shorter 1H and 4H time frames are however sitting in overbought zones which has me expecting a bit of a pull back towards 18.21 before the pair moves higher. The rate of 18.21 is the 38.2% fibo retracement rate which coincides satisfyingly with the pairs 50-day MA. The DXY is also pulling back in early morning trade which could give the battered rand some room to breathe.
Long
by Goose96
4
usdzar h8 c*h setup strong upside buy/hold setup🔸Hello guys, let's review the 8 hour chart for USDZAR today. Speculative C&H setup in progress. right now pullback/correction mode until mid may 2023. 🔸Price fractal is defined by cup structure (completed already), and the handle pattern. handle pullback/correction in progress now. will complete later near 17.80. 🔸Recommended strategy for USDZAR bulls. Buy/hold after pullback completes near 17.80. conservative TP bulls is 19/20, although this may extend a lot higher beyond 20.00. 🎁Please hit the like button and 🎁Leave a comment to support our team! RISK DISCLAIMER: Trading Futures , Forex, CFDs and Stocks involves a risk of loss. Please consider carefully if such trading is appropriate for you. Past performance is not indicative of future results. Always limit your leverage and use tight stop loss.
Long
by ProjectSyndicate
21