Forex Trading Strategies for EUR/ZAR | Expert Tips & Analysis

Instrument description

EUR is the base currency, and ZAR is the quote or counter currency. The Euro is the second most traded currency in the world after the U.S Dollar. The Euro is the official currency of Euro-Zone, which includes 19 countries out of 27 European Union members commonly known as E.U. The South African Rand, is a commodity-driven currency as South Africa is a leading exporter of precious gemstones, metals, and minerals.

The EUR/ZAR pairing is known as a minor cross currency pair as it is not widely traded in global Forex markets. The ZAR is a unique coding for currency, where the 'Z.A.' stands for 'Zuid-Afrika' which is the Dutch name for South Africa, and 'R' is for Rand. The word Rand comes from the Afrikaans word 'Witwatersrand, which is a 'white waters ridge,' in Johannesburg that contains large gold deposits. The quote of EUR/ZAR pair mostly depends on the correlation of economy of the Euro-Zone countries and South Africa.

The EUR/ZAR pair shows how many Rand will be required to buy one Euro. For example, if the current exchange rate of EUR/ZAR is 19.28, which shows 1 Euro equals 19.28 Rand; in other words, a trader would need 19.28 ZAR to buy 1 EUR.

History of EUR/ZAR Currency Pair

The Euro is the official currency of 19 from the 27 countries in the European Union. UK was an official member of the E.U. since its inception in 1993 but officially left the E.U in January 2020 after a public referendum in July 2016 popularly known as the 'Brexit'. The economies in the Euro-Zone vary considerably with Germany and France having a strong currency while the small countries face financial crisis from time to time. The trade and tourism industry flourished after implementation of the Euro since 1999. The Euro is also considered a reserve currency after the U.S Dollar, Great Britain Pound, and Japanese Yen.

South Africa is considered to be the most economically stable and developed country in the entire African continent. South Africa is the leading global producer of gold, platinum and chromium, and Rand represents an emerging middle-income market. According to statistics, the value of Rand depends on the demand for gold in the global markets. But as most of the commodities such as oil and gold are priced in U.S Dollars, any fluctuations in the value of USD impacts the global prices of oil and gold.

When it comes to trade relations, then South Africa mostly share trade with Germany from the Euro-Zone. South Africa imports 0.76% of the total exports of Germany, while Germany imports almost 8% of South Africa's total exports. The major component of Germany's exports to South Africa includes vehicles, machinery and electrical equipment, while the exports of South Africa to Germany mostly includes valuable gemstones, metals, minerals, and coins.

How to Trade EUR/ZAR Pair

The EUR/ZAR is seen as an exotic pair for trading as it has less liquidity, wide spreads, and high volatility as compared to other dominant currency pairs. The Euro represents a stable and developed economic base while the South African Rand shows a growing and emerging South African economy. The EUR/ZAR is traded 24/7 for five days a week. The trading is most active during the European sessions from 9:00 in the morning to 6:00 in the evening. On a busy day, the EUR/ZAR pair moves 100 points in a day.

The high-interest rates make ZAR as an option for carry trade, but among other options one of the common way of trading EUR/ZAR pair is by using Contract for Difference (CFDs), which gives you the option of using leverage where with a small initial deposit, you can open a larger trading position. With CFDs, you do not need to own the currency but speculate on the price change of the underlying asset. Trading with CFDsis becoming a very popular option as it increases the chance of maximizing your profits, but there is also an equal risk of considerable losses, so you may consider to apply stop loss to prevent further financial losses.

Trading EUR/ZAR pair through CFDs also gives you the option of trading in both directions, which is either going long or short. If you think that the Euro would appreciate in the coming days as compared to South African Rand, then you would go long or Buy, and conversely, if you think that the Euro would depreciate in front of South African Rand, then you would go short or sell.

How to read the Price Change in EUR/ZAR Pair

The EUR/ZAR pair is considered to quite a volatile pairing, and according to statistics, the EUR/ZAR pair is gaining 2000 to 2500 points each day. The high volatility provides an opportunity for short term traders to predict the price movements and try to profit.

Once we analyze the price charts of the EUR/ZAR pair, we see that value remained with the range of 15.50 to 17.00 from mid-July 2019 to March 2020. The highest value of the EUR/ZAR pair was recorded 20.599 on April 3, 2020, and the lowest value of 18.829 on June 10, 2020. Currently, EUR/ZAR pair trades on 19.328. The Bid price is 19.333, while the Asked price is 19.325.

If the exchange rate of EUR/ZAR rises, it means that EUR has gained value relative to ZAR, and if the EUR/ZAR rate falls, it means that the EUR has lost value, and the ZAR has appreciated. If we study the exchange rate of EUR/ZAR pair for the last five years, then the quote of EUR/ZAR reached the highest value of 18.33 in January of 2016 and the lowest value of 12.72 in April 2015.

What causes price change in EUR/ZAR pair?

The exchange rate and direction of the market of EUR/ZAR pair like every other currency pair is impacted by macro-economic factors, financial news, and monetary policies of the Euro-Zone and South Africa. The main macro-economic factors that influence the EUR/ZAR pair include interest rates, inflation, Gross Domestic Product (GDP), employment rate, and consumer price index (CPI).

The difference in decisions and monetary policies from the governing bodies such as the European Central Bank (ECB) and South African Reserve Bank (SARB) also play an essential part in determining the future value of not only Euro and Rand but also the quote of EUR/ZAR pair. The sudden fluctuations in the price movements are predictable, and EUR/ZAR may offer a unique opportunity for an experienced investor to diversify the portfolio.

A trader needs to examine the price chart and know all the latest economic news concerning E.U. and South Africa. The EUR/ZAR is a cross-currency pair that does not include U.S Dollar as the base or quote currency, but the price changes of USD plays a crucial part in determining the quote of EUR/ZAR. The quote of Euro in relation with South African Rand is quite volatile, but the EUR/ZAR pair can be effectively traded by using short and medium-term strategies.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.