- The US dollar rallied a bit during the trading session on Thursday, reaching toward the 50 Day EMA against the South African Rand.
- It’s worth noting that the 18 ZAR level sits just above here as well, and this is a market that I believe will continue to be very noisy, which makes quite a bit of sense considering that it is in fact an exotic currency pair.
- We have a lot of different things going on at the same time here.
US Dollar Strength
We have seen quite a bit of US dollar strength across the board recently, so it’s not a huge surprise to see the pair rally a bit. That being said, this is also a market that is a little bit more esoteric than many others, so I believe you have a situation where you need to be somewhat careful but recognize the fact that the US dollar tends to move in the same direction against most currencies. Furthermore, the South African Rand also has to deal with the fact that it is based on South African, a place that sees quite a bit of political chaos at the moment, and he is butting heads directly with the US government.
With this being said, I’m watching the 200 Day EMA very closely at the 18.16 level, and if we can break above that indicator, then I am going to start buying this pair, because I think we get a run to the 18.50 level. If we break down from here, then I would anticipate that the 17.5 level is an area that we might be targeting, which was the most recent swing low. With that being said, the market is likely to continue to see a lot of volatility, but I also recognize that the overall attitude of the US dollar will eventually overwhelm anything else. Keep in mind that the interest rate differential favor South Africa, but if rates continue to climb in America, we could see a bit of a reversal from that standpoint as well.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.