The FOMC’s hawkish messaging last week helped to accelerate the recovery in USD/ZAR. Economists at Credit Suisse now expect USD/ZAR to trade in a noisy fashion between 13.60 and 14.40 (up from a previous forecast of 13.40-13.80). While there is a risk of wider lockdowns amid rising covid cases, local developments remain of secondary significance for the FX markets.
A noisy trading range in USD/ZAR
“We now expect the recent rally in USD/ZAR to be replaced in the short run by a relatively wide and noisy range trading. The FOMC’s message from last week will likely make large short USD/ZAR positions seem unattractive to many investors, and will probably limit USD/ZAR downside to around 13.60, i.e. to levels close to the low seen before the FOMC meeting.”
“Investors seem to us unlikely to take USD/ZAR significantly above its recent high of 14.40 without fresh USD-positive catalysts.”
“Judging by historical correlations, a substantial rise to levels such as 15.00 will require a dramatic deterioration in the EM risk sentiment in the context of large increase in real rates in the US or a sizable drop in global equities.”
“On the local front the trend in new COVID-19 cases remains unfavourable, and the rollout of vaccinations remains relatively slow. These developments have forced the government to move the country into ‘level three’ restrictions (there are five levels) from 16 June. While the risk is on the side of tougher restrictions in the short run, we think that there is a relatively high bar for markets to price in a substantial disruption to South Africa’s core economics engines (such as mining).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Gold breaks above $2,900 for the first time on record
Gold price continues to attract safe-haven flows amid persistent worries about Trump’s trade tariffs, refreshing record highs just above $2,900. Mounting trade war and inflationary concerns prompt investors to run for cover in the tradtional store of value, Gold.
EUR/USD hovers above 1.0300 ahead of EU Sentix data
EUR/USD is flat-lining above 1.0300 in the European session on Monday, undermined by a stronger US Dollar amid Trump's fresh tariff threats. Traders await the Eurozone Sentix data and Lagarde's speech for fresh trading incentives.
GBP/USD looks vulnerable near 1.2400 on trade war fears
GBP/USD stays on the back foot near 1.2400 in the early European session on Monday. The pair appears vulnerable amid modest US Dollar strength-induced by US President Trump's latest tariff threats and mounting fears of a global trade war.
Dogecoin whale transactions fell by more than 70%; bearish move ahead
Dogecoin continues to trade down around $0.24 after falling more than 7% in the previous week. The technical outlook suggests a further correction as DOGE’s momentum indicators reflect bearish divergences. Santiment data show that DOGE whale transactions are falling, indicating signs of weakness.
Top Trumps: The global economy’s House of Cards
The year has barely started and we are learning the hard way what Donald Trump’s second term in office means for markets, analysts and global policymakers. It's like living through an episode of the political thriller, House of Cards.
The Best Brokers of the Year
SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.