Uncertainty in the markets is reaching elevated levels, and with the latest U.S Federal Reserve Banks interest rate increase, investors might have more downside on the cards.
The Fed Chair Powell made it clear that the FOMC will continue tightening monetary policy for longer, bringing all hopes of a pause in rate hikes to an end. With the dot plot projecting raising rates beyond February 2023, the U.S Dollar (USD) will continue to gain strength. In this volatile environment, diversification and portfolio protection mechanisms become focal points for investors all around the globe.
With the bullish sentiment on the U.S Dollar and the possible bearish outlook on the broader market, we look at the NewWave USD currency ETN (JSE: NEWUSD) for opportunities on the JSE. The ETN is designed to provide investors with cost-effective exposure to the USD/ZAR spot price in a listed instrument trading on the JSE.
Technicals
The USD/ZAR currency pair has been trending higher as the South African Rand lost value to a much stronger U.S Dollar. The NewWave USD currency ETN has followed suit and is currently consolidating sideways with a possible break out back to highs last seen at the height of the COVID-19 pandemic.
Summary
A possible breakout above the consolidation level of 1852c could lead to a higher possible target level at the 1919c resistance level. This could be plausible if the U.S Dollar continues higher as the hiking cycle continues well into 2023. Risk mitigation should be defined as a percentage level in line with an investor’s long-term strategy.
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