USD/ZAR Forex Signal 29/08: Holds Key Support (Chart)

(MENAFN- Daily Forex) Potential signal:

• I'm a buyer of the USD/ZAR pair above the 17.80 level, with a stop loss at 17.60, and a target of 18.00 ZAR.

The USD/ZAR pair has spent a considerable amount of time testing the 17.50 ZAR level. Over the last couple of days, we have seen the US dollar rally from that level yet again after an attempted breakdown below it. This is a very interesting level, as it has been so reliable, but we also have to worry about the 50 Day EMA sitting just above current pricing, which had shown itself to be resistance to further increase in price on Wednesday. This sets up an obvious trade from everything that I can see Currencies

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I think at this point in time exotic currencies are starting to lose a little bit of their attractiveness, perhaps due to the fact that people are starting to come around to the idea that the United States may be entering a recession. Over the last 20 years I have watched a particular pattern play out: at the first signs of a recession in the United States initially the US dollar will start to lose strength. However, the next step is that traders start to say,“this is an American problem.” They believe that the US economy won't influence the rest of the world. A little bit of time goes by, and then people began to realize that with the United States being the world's largest economy in the fact that it is roughly 26% of all global GDP, it's almost impossible for the United States after problem without everybody else having problems.

EURUSD Chart by TradingView

This makes exotic currencies especially sensitive to these negative turn of events, because despite the fact that they offer a significant interest rate differential and will pay you to hold them, the reality is that their economies are highly sensitive to the purchasing power of Americans, as many of these smaller economies are so heavily beholden to export into the United States. By the time you follow the entire global supply chain, most of it ends up in America. In other words, as goes the US economy, so go the rest of the world's economy.

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