Investors look to possible opportunities in USD/ZAR pairing in 2020
17-12-2019 08:06:00 | by: Andrea Ayemoba | hits: 4592 | Tags:

The USD/ZAR pairing (signifying the number of South African Rand needed to comprise one U.S. dollar) is not counted among the "major" pairs in forex trading. However, this doesn't mean that it hasn't garnered a lot of attention over the years. Historically speaking, USD/ZAR has been a volatile pair, and forex traders tend to find possibilities in consistent fluctuation.

As has been pointed out before on this site, forex trading can represent a significant opportunity for those who are looking to establish extra income streams - even if it's done in a part-time capacity. The numerous benefits of forex trading include things like flexibility (the market is open day and night all over the world, except on weekends), high liquidity, and seemingly innumerable currency pairings. It's simply a different sort of investment, and one that ultimately appeals to a great many people.

For those who might find the concept of forex trading somewhat foreign, FXCM offers a very helpful overview that can give you the basic idea. The overview includes basic definitions and lists of currency pairings, covers why and how to try forex trading, and explains how people make money doing it. To that last point, the guide makes a point of clarifying that forex traders can capitalize on opportunities in both directions - which is to say, whether a currency is moving up or down. And this is why the kind of volatility we've often seen in the USD/ZAR pairing can be so appealing.

So - why might 2020 be particularly interesting regarding this particular currency pairing?

For one thing, the forecasts for ZAR in 2020 have been erratic. The currency has risen and stabilized somewhat toward the tail end of 2019, likely because of the announcement of steady, unchanging interest rates heading into the New Year. But there are still some rough forecasts as well, indicating that the near future of the Rand, and therefore the USD/ZAR pairing, is uncertain to say the least.

Another reason 2020 should be interesting for the USD/ZAR pair is that the U.S. dollar could also be facing a highly unpredictable stretch, given the looming presidential election there. USA Today actually noted that the American economy tends to perform well in years when incumbent presidents (like Donald Trump in this case) run for reelection; incumbents take actions to boost the economy in the short-term (and often strengthen the dollar) to bolster their own odds at being granted another term. However, a particularly contentious election seems to be on the horizon in 2020, and enough turmoil can certainly result in economic instability as well. Thus, it's hard to predict with much certainty what we should expect from the dollar in the near future as well.

Clearly, these combined factors indicate significant uncertainty on both sides of the USD/ZAR pair. By extension, when both sides have questionable stability, it would seem to indicate more potential for volatility in the pairing. Add to that factors like President Trump's impeachment inquiry in the United States, and a downgraded projection for South Africa's 2020-2021 economy as reported by CNBC, and easiest thing to predict truly seems to be that the pairing will in fact be unpredictable.

Whether or not this is inherently good news for forex traders is impossible to say. It's true that a volatile pair brings about opportunity, because every fluctuation in any direction can make or lose a trader money. However, don't mistake this as an assertion that all traders will necessarily make the right decisions. An up-and-down currency pair invites a lot of activity - but that activity still has to be strategic, and sometimes a bit lucky, for a trader to earn significant profits.