Unless we see massive stimulus again, which given enough time we probably will, currencies like the ZAR will continue to suffer.

• The US dollar rallied again during the Friday session as it looks like the 16.88 level is now in the rearview mirror.
• The market looks very likely to continue going higher, but it’s also worth noting that we are a bit overbought at this point.
• A short-term pullback does make sense, but based on the trend that we have seen so far, it’s likely that we will see more of a “buy on the dip” type of attitude out there.

This makes quite a bit of sense, due to the fact that risk appetite has been decimated out there, so people will be much more interested in owning US dollars than emerging market currencies. That being said, it was a mixed bag when it comes to EM currencies, but clearly, the South African rand is on its back foot. That being said, a pullback at this point more likely than not will face a significant amount of support at the 16.50 level, an area that is a round figure that a lot of people pay close attention to.

Is it Time to Short the Rand?

Looking at this move, you can see that we had broken above a significant resistance barrier in that area, and now it looks like we are ready to go much higher given enough time. That being said, I don’t like the idea of shorting this market, even if you told me that it was going to start falling tomorrow. It’s not until we break down below the 15.75 level that I would consider shorting this market, and even then I would have to see what was going on in the bond market in the United States, which of course is a major driver as to where the US dollar is going.

South Africa continues to be a place that people won’t want to throw money at right now, as commodities are taking a nosedive. Remember, the South African economy is highly sensitive to hard assets as it is a major commodity producer. If there is in fact going to be a global slowdown, it makes quite a bit of sense that commodity currencies, commodities, and commodity-related economies all suffer. I think that continues to be the case going forward as we head into recession, and unless we see massive stimulus again, which given enough time we probably will, currencies like the ZAR will continue to suffer.

Buying on the dips should work in this pair as can be said about most other exotic currency pairs at the moment that are denominated in US dollars.

The US dollar rallied ever so slightly against the Singapore dollar on Monday, but it should be noted that it was Independence Day in the United States, meaning that there was probably somewhat of a lack of liquidity. This would explain why the candlestick was so much smaller than the one before it, which obviously was very bullish.

Nonetheless, it looks like the 1.40 level will end up being defended, at least in the short term. Psychological resistance, or it could be the Monetary Authority of Singapore trying to defend its currency. I don’t know if the MAS is involved quite yet, but they do not hesitate to make it known if that’s the case. After all, it’s a relatively small currency, and I can assure you that the Federal Reserve doesn’t care about this exchange rate.

You should zoom out on the chart and take a look at the fact that we are forming a massive ascending triangle. This generally means that the market will build up enough momentum to finally break down, and when it does we should have some follow through. Much like their Indian counterparts, I believe that the Singaporean central bankers understand that the US dollar is going to strengthen no matter what they do. At this point, it is more or less going to be a job to keep the rate of change somewhat reasonable. Remember, when you are paying for goods in US dollars using your own currency, if it’s depreciating, that makes inflation even worse.

The Singapore dollar could get a little bit of a bid against other Asian currencies as a safe haven, but against the US dollar I think it’s going to continue struggle. That being said, I do not expect the Singapore Dollar to melt down, just that it will follow the same trajectory against the greenback as everybody else. On a daily close above the 1.40 level, it’s very likely that we will continue to go much higher. I anticipate that the 1.39 level and the 1.38 level both offer support, especially as the 50-day EMA just crossed above the 1.38 level. Buying on the dips should work in this pair as can be said about most other exotic currency pairs at the moment that are denominated in US dollars.