The US dollar continues to struggle against the South African Rand, as commodities continue to be a strong play overall, and the ‘carry trade’ remains strong.
- The US dollar continues to struggle against the South African Rand, and that makes quite a bit of sense as the market is very much in a carry trade mode.
- What I mean by that is we have a situation where traders are doing anything and everything they can to pick up a positive swap.
With that being the case, the South African Rand is particularly interesting as it has not only been historically higher interest rates for South Africa than the United States, but it also has, beyond the positive swap, the fact that we have the hard commodities out there doing so well. If that’s going to be the case, then it makes a lot of sense that the South African Rand does well as money flows into that economy.
While I am very bullish on the US dollar over the next year or so, I think once we get through a lot of noise, the reality is that South Africa also has the benefit of holding a lot of gold and resources on its land.
A Great Carry Trade
So, with that being said, and the simple fact that we’ve been in such a strong downtrend, I think this is a great carry trade pair that we just simply hold on to with a small position and collect a little bit in our account every day.
Longer term, I do think that this pair could very well end up all the way down at 14.7, which is quite some distance from here.
Rallies that show signs of exhaustion, I am still selling. With that being the case, I have no interest in buying, but if we did break above the 17 area, then maybe I’d have to start to think about it.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
