The USD/ZAR exchange rate jumped to a record high last week as concerns about the South African economy continued. The South African rand crashed to a low of 19.53, much lower than the year-to-date high of 16.73. In all, the USD to ZAR pair has jumped by more than 43% from the lowest level in 2021.
SARB decision and FOMC minutes
The South African rand plunged hard as concerns about the latest accusations about the country’s role in financing the ongoing war in Ukraine. South Africa has rejected the accusation and announced that it will take measures to solve the crisis.
There will be several important catalysts for the pair this week. First, on Wednesday, the Federal Reserve will publish the latest minutes of this month’s meeting. These minutes will provide more information about what to expect later this year.
On Friday, Fed Chair Jerome Powell hinted that the bank will not hike rates as high as it was expecting earlier this year. He cited the challenges in the banking sector, which he believes will lead to a liquidity challenge in the economy.
The other important USD/ZAR news will come from South Africa. The country’s statistics agency will publish the latest consumer price index (CPI) data on Wednesday this week. Economists expect the data to show that the headline consumer price index dropped from 7.1% in March to 7.0% in April. Core CPI, which excludes the volatile food and energy prices is expected to drop from 0.8% to 0.5%.
These numbers will come a day ahead of the latest interest rate decision by the South Africa Reserve Bank (SARB). With inflation above its target range, analysts believe that the central bank will hike rates again by 25 basis points to 8%.
USD/ZAR technical analysis
The USDZAR price has been in a strong bullish trend in the past few months. It managed to move above the important resistance point at 18.74, the previous highest point on record. The pair moved above all moving averages while the Relative Strength Index (RSI) and the Stochastic Oscillator moved above the overbought level.
Therefore, it seems like bulls have the momentum, which will see the pair rise to the next resistance level at 20 this week. The alternative scenario is where it retests the support at 18.74 and then resumes the bullish trend.