The USD/ZAR exchange rate continues to soar after last week’s meeting between Donald Trump and Cyril Ramaphosa in Washington. It plunged from a high of 19.93 on April 9 to a low of 17.80 this week as investors focus on the upcoming South African Reserve Bank (SARB) interest rate decision.
This article provides a forecast for the USD/ZAR pair and the key levels to watch in the coming weeks.
USD/ZAR technical analysis as death cross nears
The daily chart shows that the USD/ZAR exchange rate started a strong bearish trend in April when it jumped to a high of 19.93. It has now crashed by over 10% , and is hovering at its lowest level since December last year.
The pair has crashed below the crucial support level at 18, a psychological point and the lowest level on March 18 this year.
Most importantly, the USD to ZAR pair is about to form a death cross as the 50-day and 200-day weighted moving averages near their crossover. A death cross is one of the most bearish patterns in technical analysis.
The Average Directional Index (ADX) has jumped to 25, a sign that the downtrend is continuing to gain momentum. Also, the Relative Strength Index (RSI) and the MACD indicators have continued moving downwards.
Therefore, the path of the least resistance for the pair is bearish, with the next target to watch being at 17.62, the lowest level in December last year. A break below that price will point to more downside, potentially to 17, the lowest swing in September last year.
On the flip side, a move above the resistance level at 18.50 will invalidate the bearish outlook.
USD/ZAR chart by TradingView
SARB decision, FOMC minutes
The next key catalyst for the USD/ZAR exchange rate is the coming SARB interest rate decision scheduled on Thursday this week.
This decision comes a week after the statistics agency published the latest consumer price inflation data. The report showed that the headline CPI rose to 2.8% in April from 2.7% a month earlier. It remains inside the bank’s target range of between 3% and 6%, which the deputy governor believes is too wide.
Analysts believe that the bank will decide to slash interest rates by another 0.25% to 7.25%. It has delivered three cuts since last year, bringing the benchmark rate from 8.25% to 7.50% today.
The rate decision comes a week after Trump embarrassed Ramaphosa, the country’s president in the White House by showing discredited videos on white genocide.
The USD.ZAR pair will also react to the upcoming Federal Reserve minutes, US GDP data, and the PCE report. While these numbers and events are important, their impact on the US dollar will be minimal since the Fed has hinted that it will embrace a wait-and-see approach.
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