How to trade USDZAR pair — raise the African economy from the knees

Hello, friends!

Today we will move to a distant and mysterious Africa, namely, to South Africa. It’s about trading a South African rand, represented on the Forex in the form of a pair of USDZAR. In addition to South Africa, this currency is used in Namibia and Lesotho. Let’s find out the opportunities of this very easy-to-trade pair that many traders do not pay attention to.

Economy of South Africa

The economy of South Africa is based on mining. Next, to Johannesburg, there is the world’s largest gold mine, as well as copper, coal, manganese and iron ore.

The original rise of the region started due to the gold and diamonds extraction. Earlier it was a Dutch colony, later British, so now you can find there a lot of Dutch and British dishes, slightly renamed to local manners, or using antelope meat instead of beef.

In large cities such as Cape Town and Johannesburg, there are clusters of white people that try to avoid the black population. Therefore, if you are an ordinary white guy, you should stay away from the black guys in South Africa, otherwise, you can lose not only your wallet but also your life.

In addition to the mining industry, there is also metal processing, mechanical engineering, light industry, and production of construction materials. There is also some big car making companies having their factories here: BMW, Toyota, Ford. Agriculture is also well developed: sugar cane, citrus, and subtropical crops are grown.

In general, the economy of South Africa belongs to the developing countries, and it is predicted to grow further because over time the country develops and departs from the wild old order. To grow, developed countries such as America or Germany need to work hard, for developing regions there is still a lot of space for growth, which also affects the currency. The interest rate at the moment is 6.75%.

Well, the South African rand, which at the moment is $0.08, appeared not so long ago, and before that, the South African pound was in circulation. Actually, the currency appeared simultaneously with the proclamation of the South African Republic and its withdrawal from the British Commonwealth.

Chart analysis

On the weekly chart, you can see that the long-term trend of the USDZAR pair is up, that is, the dollar is growing and the rand is falling. Nevertheless, the last two years (from the beginning of 2016) the situation is in the opposite direction.

Therefore, it is difficult to give any long-term forecasts here. It is possible that the situation will continue and the pair will continue to fall.

As for swaps, the situation varies greatly from broker to broker. The swap of long positions is negative, for short positions it is positive. Roboforex broker offers such swaps:

If you trade on daily charts, it makes sense to open only short positions. However, the items in this currency are very cheap. One item is approximately equal to 7-8 cents when trading a lot of 0.1.

Trading time is standard. The most active time is Europe and America. From interesting observations, it can be noted that, as a rule, one direction remains in the course of the day. That is, if at the beginning of the day the pair begins to fall (in the first hours of the European session), then most likely it will continue to fall until evening, until the middle of the American session. After that, there comes a lull. Breakout strategies will work well.

Price Action on this pair, according to my observations, does not work very well. At least, the pin bars and Doji do not work very well. In turn, breakdown models, such as Outside bar and the Inside Bar work out quite good. At the same time, you can enter not only on the breakdown of the mother candle but also on the breakdown of the Inside Bar.

I do not observe any clear working out of any round levels, again, determining the trend will do the most. You can safely use trend lines, their breakdown and rebound from them.

The tool is simple, so the most primitive methods of technical analysis work well. The pair resembles cryptocurrencies, where simple strategies, aimed specifically at the behavior of people (traders), rather than some tricks, work better.

That’s why the Fibo levels work here.

Volatility

The most volatile day for USDZAR is Monday. On this day, volatility exceeds the average by about 15%. If you take the average daily volatility, then it is about 2000 points.

The graph shows that this value is not distributed evenly. There are days with large movements, but there are more or less calm ones.

You can see that the movements prevail in the European and American sessions.

Correlation

Correlation shows a strong dependence on USDCHF. Thus - if there is any signal on USDCHF, then you can enter USDZAR on the same signal.

There is also an inverse correlation with gold prices. Gold falls - rand grows. The nature of the dependence is obvious - South Africa is the largest gold miner, so gold prices are important for the country’s economy. Although gold production has fallen over the years - that is, the country becomes less dependent on this indicator.

News

As for the news, everything is simple here, looking at the news related to the US dollar, as news on the rand are rarely published. As a rule, these are just some decisions on the interest rate, or some important events, for example, a change of government.

Conclusion

In general, the USDZAR pair is very simple in trading. Someone may be confused by negative swaps on long positions, but since the pips are very cheap, it does not matter much. Breakout strategies work out well as the movement of the pair is quite monotonous. Price Action is unlikely to be necessary here, since there is still more focus on the trend. Same as on cryptocurrencies - Fibonacci levels work perfectly.