Many of you may be wondering why my monthly forecast includes the South African Rand. If you are not someone who follows global events, you’re not aware of the fact that the South African government is starting to confiscate farmland from white farmers. On the other side of that equation, you have the armed militia groups that have vowed to fight. While I don’t think that a civil war is coming, it certainly seems to me that South Africa has chosen the path of Zimbabwe and Venezuela. It is in this scenario that I think that the South African Rand is going to get absolutely wiped out sooner rather than later. You can see on the chart that we have rallied significantly for a couple of months now, and it does not look like it’s about to change. It makes a lot of sense that people run to the safety of the US dollar when running from the potential damage of the South African economy.
Breaking above the 14 level was significant, and it appears that the last week of the August month is starting to show that area to be supportive. The spread in this pair can be quite high, but the PIP value is small. This is an investment, one that has the potential to melt up rather rapidly. Unlike the Zimbabwe dollar, the South African Rand is easily traded, and therefore a potential trade for most retail traders. Pullbacks from here will not only find support from the 14 level, but also the 13.25 level. This may be out of the realm of normalcy for many of you, but I think this pair certainly has a much higher risk to reward ratio than many of the other ones that you typically trade. You can see that we have just wiped out a significant move lower from this time last year.
