USD/ZAR Talking Points:
South Africa Interest Rates Remain Unchanged
The South African Reserve Bank (SARB) has kept repo rate unchanged at the record low level of 3.5% despite fears of rising inflation.Despite a higher than expected CPI (consumer price index) for August, figures remain within the Reserve Bank’s current target range of 3 – 6%.
DailyFX Economic Calendar
With South Africa’s vaccine rollout program lagging behind, stringent lockdowns combined with political unrest have continued to weigh on the volatile Rand. However, as economic activity gains traction, unemployment remains at all-time highs of approximately 34%, placing tax payers under an immense amount of pressure.
Although commodity prices have kept the South African economy afloat throughout the quarter, the collapse of China’s property developer Evergrande and supply constraints remain key catalysts that will likely affect both Rand strength and further rate hikes for the rest of the year.
USD/ZAR Price Outlook
At the time of writing, USD/ZAR is trading between key Fibonacci retracement levels of historical moves, currently providing support and resistance for the imminent move.
After breaking above the 38.2% retracement of the above mentioned move at 14.62 earlier this week prices continued to rise with the collapse of Evergrande weighing heavily on commodity prices, key resources for the SA economy.
USD/ZAR Daily Chart
But as the rally lost momentum, Dollar weakness boosted demand for EM currencies which are likely to remain bound by risk-sentiment.
For now, key levels remain between 14.5 and 15.00. A break above 14.70 may provide bulls with the opportunity to drive prices back above the key psychological level of 15.00.
Contrary to this, a break below 14.5 could see bears driving prices back towards 14.00
— Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707