USD/ZAR Forecast 07/01: Rand Hits 3-Year High (Chart)

(MENAFN- Daily Forex)

• The South African Rand is trading at a 3-year high at the moment and looks to continue to strengthen.
• The US dollar has been choppy against the South African rand on Tuesday, but it is in the midst of a major downtrend, and therefore, I think we are looking at this as a market where you continue to see opportunities to get short on bounces.
• In fact, the South African rand is trading at a 3-year high as the pair is oversold at the moment, but it shows no real signs of a potential reversal.

Those reversals will more likely be jumped on, and with that being the case, I think you have to look at this as a market that you're looking for value in the case of owning the South African rand. The 16.50 level has the look of an area that could offer a bit of resistance, and it is worth noting that a couple of weeks ago, when we sliced through the 17 level, things really started to fall apart.

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The 16.91 level is massive resistance as well due to the fact that the 50-day EMA has been so closely watched. The fundamental situation is that we have a commodity boom, especially gold, which significantly boosts South Africa's export revenue. The rally is partially driven by safe haven seeking amidst rising geopolitical tensions such as the military action in Venezuela.

EURUSD Chart by TradingView

Markets are also pricing in improved fiscal stability and credible monetary policy from the South African Reserve Bank, so the“risk on” sentiment for emerging markets is also favoring the high-yielding South African rand. The US dollar weakness is partially driven by the Federal Reserve's recent rate-cutting cycle, but the yield differential has only widened between the United States and South Africa due to that. With that being the case, I think we continue to see a downward drift. There is uncertainty around the world, and that could occasionally cause a bit of a bounce, but until gold settles down and unless something changes in the South African economy, I think you still look at each rally as an opportunity to buy the South African rand.

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