Photo - Andreas Zanin
Andreas Zanin
Analysis | July 30, 2021

Trading Exotic Currencies: USD/ZAR & USD/MXN

In this post, we will look at the outlook for the USD against two exotic emerging market currencies – USD/ZAR and USD/MXN. Our view of the fundamentals, sentiment and key technical levels to watch are below…

The USD has had a correction on a Dovish Fed on Wednesday and risk on in the stock market where we have hit another multi-year high. Against this backdrop, the USD should be falling hard on the ZAR and MXN which are highly sensitive to risk-on and risk-off but USD/ZAR remains in a big uptrend, and USD/MXN is trading in a range.

Both currencies rely on USD inflows and the consensus market view on the reduction of Fed stimulus is “We continue to expect the taper countdown to start with a first warning at the September FOMC meeting that leads up to a formal announcement at the December meeting. We see a 20% probability that the formal announcement will come in November, a 55% probability that it will come in December, and a 25% probability that it will come after the end of this year” (Goldman Sachs)

Our view is the above is discounted and the Fed may cut stimulus by the end of the year with the first warning coming at the August Jackson Hole summit of bankers which has been used by the Fed in the past to indicate changes in policy. We think the good news in terms of stimulus is in the price and stock markets are a huge bull market but in recent months are not providing big support to the ZAR or MXN – We view the USD as a buy-on strength.

USD/ZAR

We have seen the USD correct back to the 20 day moving average ( the green line) which has supported the USD since it broke to the upside back on June 15th and we are looking for the USD to find support here or into the big 14.40 level. If 14.40 Holds we view the USD as a buy on a breakout above resistance for a move on to chart highs with a possible run on up to the big monthly resistance level at 16.00.

USD/MXN

This pair has seen choppy sideways price action and volatility has been low in recent weeks. We have corrected back to double trend line support and expect it to hold the pullback. If we break above the 20 day moving average and back above the 20.00 level we expect a strong move to the upside to 20.80 and a possible run on up to 21.20.

 

 

Research provided by LearnCurrencyTradingOnline.com

The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.

Before making any investment decisions, you should know that:

– Key to Markets publishes analysis of any kind solely for information purposes and such analysis should not be construed as investment advice or a solicitation to buy or sell any financial instruments including without limitation CFDs.

– Key to Markets will not be liable for any loss or damage, which may arise, directly or indirectly from use of or reliance on the data provided by Key to Markets.

– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.

– Past performance is not a guarantee of future results.

Latest Article
Improve your trading with a True ECN Broker
Trading account overview