USD/ZAR – All Time Highs On The Way ?

Good day traders and welcome back to another market breakdown. Today we will be looking at the US Dollar against the South African Rand. Let’s have a look at what this exotic pair has in store for us.

MONTHLY TIMEFRAME

USDZAR has been one of the most affected pairs when it comes to the worldwide pandemic that we are currently experiencing. We have seen surges in price of almost 40% in roughly 3 months, from January until the end of March. The previous monthly candle has closed above the highs of 2016, showing further momentum into the highs.

The upside is understandable, as we have seen strengthening of the US Dollar due to President Trump pushing the FED for a more aggressive stimulus package, to combat the effect of Covid-19. Another thing to note is that during normal conditions we see gold act as a safe haven, however during these conditions where we have a worldwide economic slowdown, we see the dollar act as a safe haven as it is the world reserve currency. 

WEEKLY TIMEFRAME

Dropping down to the weekly timeframe, we can see price climbed further to eventually create a new high at 19.345, but immediately reversed and has almost engulfed the prior week’s price action. This pullback is expected though as we have had such a bullish run for the past 3 months. Looking at the current week, we’ve seen a sharp pullback as South Africa’s central bank cut interest rates from 5.25% to 4.25%, calling a state of emergency.

Looking at the last time we broke the prior highs of 2008, in 2015, we had a 50% price move to the upside. Should we see similar price action, this would coincide with the inverse head and shoulder seen, now breaking the neckline withe a target point around 24.15.

DAILY TIMEFRAME

Dropping down to the daily timeframe, we can see that price slowly approached the level of 17.76 which was the previous all time high for USDZAR. However, price fell short and tested the prior resistance now turned support, also slowing down around the key level of 18.00. We also reversed off of one of our favourable fibonacci levels and we are looking for a continuation into the highs.

4 HOUR TIMEFRAME

After seeing this move off the 61.8% fibonacci, we’ve seen a push into these recent levels of resistance however we anticipate further upside with a potential break and retest of this level. 19.00 will be a crucial price point to cross.

1 HOUR TIMEFRAME

Looking at the 1 hour timeframe, we have seen a break of structure with a higher low and higher high sequence beginning. Looking left, we can see 3 drives into the low followed by consolidation and a breakout to the upside. Price has now reached minor resistance where we may see a retracement or more likely, a break and retest or some consolidation.

Fundamentally the emergency interest rate cut from South Africa puts the dollar on the front foot, as well as retail sales coming in slightly better than expected this Wednesday afternoon. Economically, USA is ahead of South Africa and the world reserve currency status favours more dollar upside.

Lockdown will also massively effect the economy and GDP, so should we see lockdown extended in South Africa, we will see further upside on USDZAR. Expect volatility in the market due to the current ongoing pandemic and keep in mind that USDZAR is an exotic pair. Take spreads into account when forming setups and trade safely.

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