USD/ZAR, USD/MXN and USD/JPY Forecasts – US Dollar Drifting a bit Lower in Early Trading

USD/ZAR Technical Analysis

The US dollar has drifted a little bit lower against the South African Rand during the early hours here on Monday, testing the 200-day EMA and the 17 level and failing. I do think ultimately this will be an interesting pair to watch because of the carry trade aspect of it.

That, of course, is a situation where if things at least stay somewhat stable, you could see the US dollar drift back towards the 16.50 level, maybe even 16. If we break above 17 on a daily close, I think that signals that the trend is changing. Remember, the interest rate differential favors South Africa.

USD/MXN Technical Analysis

The US dollar has also fallen against the Mexican Peso as it looks like traders are looking to pick up that swap today, that carry trade position. 18 Mexican Pesos is a very important level. It’s almost identical to what we are seeing in the South African Rand, where we have brushed up against a large, round, psychologically significant figure only to fail. We’ll see if that ends up being true that we drop down to 17.5, but as things stand right now, it certainly looks like we’re going to try.

USD/JPY Technical Analysis

The US dollar is falling against the Japanese Yen, going against the swap differential, but both central banks have interest rate decisions this week, and of course, there’s a lot of noise out there in general. The 160 Yen level is an area that I’m watching very closely because once you get above there, maybe 161, you start to talk about breaking a 35-year resistance barrier.

I do think you buy this on a pullback and a bounce. I’d love to see it drift towards 158 to find some value, but we’ll just have to wait and see how this works out too. I have no interest in shorting this particular pair.