The USD/ZAR exchange rate continued its recovery as the US dollar rebounded and after the South African Reserve Bank (SARB) slashed interest rates. It rose to a high of 17.4685, its highest point since November 5 and 2.47% above its lowest level this year.
Focus on the FOMC and SARB Decisions
The USD/ZAR pair has rebounded in the past few days as investors reflected on last week’s South African Reserve Bank (SARB) interest rate decision and inflation report.
In a statement, the bank decided to slash interest rates by 0.25%, bringing the benchmark rate to 6.75% as most analysts were expecting.
The cut came after a report showed that the country’s inflation remains inside the bank’s target band of between 3% and 6%. The most recent report showed that the headline Consumer Price Index rose to 3.6% in October, its highest point in months.
Traders anticipate the bank to deliver more cuts in the next 12 months, a move aimed at supercharging the economy. This rate cut came a week after the Minister of Finance delivered his budget, in which it adopted the new 3% inflation target.
Top Forex Brokers
The budget also led to a credit rating upgrade by the S&P Global, with Moody’s and Fitch expected to do the same in the next few months. This upgrade is a sign that the economy is doing well now that load-shedding has largely ended.
The USD/ZAR exchange rate also reacted to the strength of the US dollar. Data shows that the dollar index has surged to $100.19, its highest point since August.
Economists have a mixed opinion on what to expect from the Federal Reserve in the next meeting. Some Fed officials have warned on the dangers of cutting rates now that inflation has remained above the 2% in the last four years.
USD/ZAR Technical Analysis
The daily chart shows that the USD/ZAR exchange rate has rebounded in the past few days. It has rebounded from a low of 16.96 earlier this month to the current 17.37.
The pair has moved slightly above the 50-day and 25-day Exponential Moving Averages (EMA). It has also formed a descending channel, while the Relative Strength Index (RSI) and the MACD indicators are rising.
Therefore, a move above the upper side of the descending channel will point to more gains, potentially to the psychological point at 18. A move below the support at 16.96 will invalidate the bullish outlook and point to more South African rand gains.
Ready to trade our Forex daily analysis and predictions? Here are the best Forex brokers with ZAR accounts to choose from.