- The US dollar is slightly firmer against the South African rand while holding near major support at 17.
- Trading remains choppy, with resistance at the 50-day EMA and a likely range between 17 and 17.5 until the Federal Reserve direction becomes clearer.
The US dollar is slightly positive against the South African Rand during trading on Thursday, as we continue to bump along the bottom here. The 17 Rand level will continue to be a major support level from everything I see, and at this point, I think this little bit of a bounce is probably not much of anything. The question at this point in time is whether or not the 50-day EMA will continue to offer resistance. If it does, then we probably eventually break down. But you can also make a little bit of an argument here for an attempt at forming a rounded bottom, which, of course, is a longer-term bullish sign. So, we'll watch that. A breakout above the 17.50 Rand level confirms this. But at this point in time, I think it's probably more choppiness that we'll see than anything else.
Range Expectations and Macro Considerations
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In fact, I fully anticipate staying in a range between 17 and 17.5, at least until we get a bit of clarity when it comes to the Federal Reserve and what they will be doing next. South Africa actually has a higher interest rate attached to it than the United States. So, the fact that it's drifted lower makes a lot of sense because you do get paid to hang on to the rand every day. That being said, though, if there is concern out there about the global economy, economies like South Africa, Mexico, and the like just get hammered by forex traders because they run to the safety of the US treasury market. Remember, if you're overseas, you have to convert the dollars to get those treasury bills or bonds. That is one thing that I could see happening, but we'll just have to wait for a definitive move.
This pair has moved in the opposite direction of many of the major pairs, meaning it has favored the rand over the dollar for months now, while the US dollar has been strengthening against other currencies such as the Euro, the Canadian dollar, the Japanese yen, the British pound, Swiss franc. So in this environment, it is a little bit backwards, but I think there's a little bit of confusion and hesitation here. So, play the range is exactly how I would look at this market.
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