Fuel prices are set to drop further, what does this mean for the South African Economy

The whole world has been victim to fuel shortages which caused a sudden spike in fuel prices to record highs. However, different governments have used strategies to reduce these prices and most have been successful as prices have been steadily dropping since their record highs in July. South Africa is one of those countries that succeeded in this endeavor and according to the Central Energy Fund prices are still yet to drop even further. What does this mean for the country's economy and what opportunities does this present for us traders？

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Why are fuel prices set to drop this coming September？

The Central Energy Funds expect fuel prices to fall by just over R2.2 this coming month as fuel prices will be adjusted on the first Wednesday of the month. The South African government has reduced the fuel levy fee in order to reduce the price of fuel for South Africans. This loss in revenue is intended to be made back by the South African government by selling of 5million barrels of oil.

This is good news for the South African economy as the cost of transporting goods and services will become cheaper, the prices of products will become cheaper, and inflation can be kept in check. This means in the coming few months we may see the ZAR gaining some of its strength back.

How can we take advantage of this opportunity as traders？

We should start looking for positions where will can go long on currency pairs that feature the ZAR. On the USDZAR we see the pair is trading right below the R17 per dollar level. We should expect this level to be tested a few times before the pair falls to its renewed strength. We should be on the lookout for spikes in volume to this highlighted level as the market makers will be out to stop-out traders, then a sudden drop in as the selling pressure may suddenly appear to disorient traders. New adjusted fuel prices are announced on the first of every month so we should keep a close eye on this announcement and prepare to trade either way in accordance to the announcement