Trade Idea: Long USD/ZAR During This Market Turmoil

Trade Idea: Long USD/ZAR During This Market Turmoil

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According to MarketMilk™, USD/ZAR is in a strong bullish trend.

Check out its Trend Following Rating on the daily (1D) timeframe…

USD/ZAR on MarketMilk

If we look at the daily chart, we can see that there had been resistance around the 15.3000 area (dashed red line) but USD/ZAR was able to break out at the beginning of the month.

USD/ZAR Daily Chart

Notice how price is trading above all SMAs on the chart, from the fast 20 SMA down to the slow 200 SMA.

This confirms what MarketMilk™ is telling us…..the trend is definitely towards the upside.

The 20 SMA (orange line) has acted as a strong dynamic level and continues to do so.

The world is currently in crisis mode, due to the coronavirus pandemic, and when there’s a crisis, traders rush to safe haven currencies.

Safe haven currencies are currencies that are expected to retain or increase in value when it seems like the world is coming to an end (geopolitical stress).

The U.S. dollar, along with the Japanese Yen and Swiss franc are considered safe haven currencies.

When the isht hits the fan, there is usually a “flight to safety” to one or all of these currencies.

I don’t see the world returning to normalcy anytime soon so my bet is that USD/ZAR will continue to rise as traders prefer the U.S. dollar over the South African rand.

As shown earlier, from a technical analysis standpoint, USD/ZAR is definitely in an uptrend so I’m going to try and ride this trend for as long as possible.

Here’s my trade idea….

  Short-Term Bollinger Reversion Strategy 2.0 (Jan. 30 – Feb. 6)

I’m going to go long USD/ZAR at market price (16.5500).

My stop loss will be when the ROC indicator closes on a negative value

The ROC indicator on the chart is measuring the “slope” of the 20 SMA. As long as its value is a positive, it means the slope is rising.

Basically, if the slope turns down, I’m out.

Why? Because if the slope turns down, it means momentum of the uptrend is weakening or even done, and I don’t want to stick around to find out if it’ll continue.

The ROC will also serve as a trailing stop function.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.

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