US dollar continues to see a lot of back-and-forth behavior against the South African rand, as we are dancing around a support level that has been important.
USD/ZAR
The US dollar continues to see a lot of back-and-forth behavior against the South African rand and for me this makes a certain amount of sense as the 16.25 level continues to offer support. Furthermore, just above we have the 50-day EMA at the 16.55 area offering resistance.
If the US dollar continues to rally from here, I will not be a buyer against the South African rand because I have no interest in paying the swap. The interest rate differential would work against you. That being said if we can rally from here I would look at the 200-day EMA as a potential area to start shorting. I have got no interest whatsoever in trying to get too cute here.
Interest Rates and Geopolitical Influences
What I want to see is a little bit of a rally and signs of exhaustion. If we can get good news out of the Middle East and we are starting to see signs of maybe this thing might end before it is all said and done that should help the South African rand or perhaps more importantly it should help the US dollar cool off a bit.
Interest rates in the 10-year yield are right around the 4.3% level in the United States and that seems to cause quite a bit of problems. If we break down below the 16.25 level, then I would anticipate that the dollar drops down to the 15.9 level.
I do like shorting this pair, but I think maybe we have got a short-term bounce ahead of us so we might get a better entry on a short trade. If we continue to rally somewhere near the 17 level, I would anticipate seeing trouble but again if I am going to buy the dollar it is going to be a currency that has almost no interest behind it for example the Swiss franc.