- During the month of November, the US dollar has been very noisy in general.
- This is true in most currency pairs and won't be any different against the South African Rand.
- As things stand right now, it looks like the US dollar is trying to find some type of base against the South African Rand, with the 17 ZAR level being important.
This is an area that we have tested a couple of times during the month but have bounced every time we've reached it. As we head into the month of December, there are a lot of questions about interest rate cuts coming out of the Federal Reserve. And depending on which day you were listening to Wall Street pundits, you may get a different answer. There have been times when the odds of an interest rate cut have dropped to something in the neighborhood of around 30%. But earlier in the month, it had been 86%. It'll be interesting to see how this plays out because obviously it'll have a major influence on the entirety of the Forex markets, but this particular pair is a little bit different.
Interest Rate Differential and Key Levels
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The U.S. interest rate is quite a bit lower than the South African interest rate. So I think if we continue to see a little bit of risk appetite out there and perhaps hints of the Federal Reserve cutting, that could push this market below the 17 level. The 17 level is important and could open up a move down to 16, but I think it takes a while to get there.
Alternatively, if we get a run towards safety, it's possible that the US dollar bounces from here, but it is going to run into some trouble near the 17.50 level, but that does opens up a move to the 18.20 level. This is one of those few places where the United States dollar is particularly vulnerable due to that interest rate differential, but we need calm markets overall to take advantage of that.
In general, I believe that we will probably see more of a neutral market for a few weeks, and then more likely than not see a bigger move at the beginning of January. That being said, fading short-term rallies will probably be the way to go. Unless we can break above the 200-week EMA at the 17.54 level, which could technically start to turn the triad, although even then, you have a lot of noise just above.
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