USD/ZAR Forecast Ahead of SARB Interest Rate Decision

Summary:

USD/ZAR is trading lower after the higher-than-expected South African CPI data. The focus is now on the SARB interest rate decision.

USD/ZAR is trading lower after the higher-than-expected inflation data from South Africa. The country’s consumer prices rose by 4.9% in June on a year-on-year basis. While the figure is lower than the previous month’s 5.2%, it beat the estimates of 4.8%. With the exclusion of the volatile food and energy components, core CPI rose by 0.3% compared to the forecasted 0.2% MoM.

Nonetheless, the currency pair remains under pressure as the US dollar trades near its highest level since early April. At the time of writing, the dollar index, which tracks the greenback against a basket of currencies, was up by 0.09% at 93.04.

Notably, the safe-haven appeal of the greenback has increased as the aggressive spread of the Delta coronavirus variant boosts a risk-off mood. In the ensuing sessions, the risk sentiment and SARB’s interest decision will be key drivers for USD/ZAR.

The latter event, which is scheduled for Thursday, will be a key economic indicator as the country continues to struggle with domestic strife. Analysts expect the central bank to maintain the current repo rate as the nation remains in recovery mode.

USDZAR technical outlook

USD/ZAR is up by 0.30% at 14.6651. While the pair has pulled back after hitting an intraday high of 14.7412, it remains on an uptrend. Since the beginning of the week, it has surged by about 1.88%. On a two-hour chart, it is trading above the 25 and 50-day EMAs.

In the near term, I expect the currency pair to find support along the 25-day EMA at 14.6000. A move below that level will have the bears eyeing the prior support level at 14.5415. On the flip side, a move past Wednesday’s high of 14.7412 will place the next resistance level at 14.8000.