USD/ZAR prediction: South African rand eyes 15 after dovish SARB

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jul 23, 2021
  • The USD/ZAR pair tilted upwards after the latest SARB interest rate decision.
  • The bank left interest rates unchanged and pointed to a Q4 rate hike.
  • The pair could keep rising as investors eye the resistance at 15.00.

The USD/ZAR pair tilted upwards after the relatively dovish interest rate decision by the South Africa Reserve Bank (SARB). The pair rose to 14.7585, which was the lowest level in more than a week.

SARB interest rate decision

In the past few meetings, SARB was among the most hawkish Central Banks in the emerging markets. The bank committed to hike interest rates to deal with the rising inflation even as the country’s unemployment rate rose to more than 40%.

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The bank had a change of tone on Monday when it delivered its interest rate decision. In it, the bank left its benchmark policy at a record low of 3.5%. The rate has remained at this level for the past six straight meetings. The statement revealed that the bank will likely hike interest rates to 3.79% towards the end of the year. This signal was lower than the previous guidance of 4.07%. In a note, a Bloomberg economist said:

“The South African Reserve Bank continued to signal the fourth quarter as the target for resuming rate hikes, though weak demand and muted core inflation probably makes this timeline slightly ambitious.”

The SARB decision came at a difficult time for the South African economy. The unemployment rate has surged to more than 40%. 70% of young people are unemployed and the level of inequality has surged. 

At the same time, recent protests have led to substantial damage to the economy. In a statement, the SARB governor said that these riors will have a lasting damage to the economy since they will lead to low investor confidence. The bank also expects the economy will grow by 2.3% and 2.4% in 2022 and 2023. It also sees the South Africa inflation rising to 4.3% this year.

USD/ZAR technical analysis

USD/ZAR
USD/ZAR chart

The four-hour chart shows that the USD/ZAR has been in a strong bullish momentum recently. It has jumped by almost 10% from its lowest level in June. Along the way, it has moved above the 25-day and 50-day moving average. It is also slightly below the upper side of the rising channel. Therefore, the pair will likely keep rising as bulls target the next key resistance level at 15.00. This prediction will be invalidated if the price falls below 14.500.

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