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USD/ZAR – US Dollar Set up to Continue Strengthening Against the SA Rand

USD/ZAR Highlights:

  • USD/ZAR looking to keep building on strength
  • Risk sentiment important for ZAR outlook

USD/ZAR looking to keep building on strength

Recently we saw USD sag versus several of the emerging market and developed market currencies, but not so much against ZAR. This relative strength is seen a positive for USD/ZAR as the Dollar tries to regain its footing in both the DM and EM space.

A pop higher from here will have in play the 2016 high at 17.76, which was right around the area where the April/May congestion pattern had found a floor. Upon arriving there, should USD/ZAR keep its push going, will be an important test. Recapture resistance on a daily closing basis and we could see the spring highs challenged quickly.

Fall back lower from here and the picture doesn’t turn bearish yet but will be in-line with the intermediate-term trend off the April high and so momentum will need to be relatively light. A break of the trend-line from January and drop below 16.32 would be quite damaging. At this time that is seen as an unlikely scenario.

A potential tailwind for USD/ZAR is the distinct possibility that stocks could decline and risk sentiment sours materially. Further retraction in risk-taking behavior will weigh on ZAR and other EMs, helping the case to be short those currencies in particular versus USD.

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USD/ZAR Daily Chart (resistance ahead)

USD/ZAR daily chart

USD/ZAR Chart by TradingView

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