USD/ZAR forecast: Rand forecast ahead of SARB decision

The USD/ZAR price was under pressure on Thursday as investors reflected on the hawkish Federal Reserve decision. The pair also retreated as the market waited for the upcoming interest rate decision by the South African Reserve Bank (SARB).

Fed decision

The Federal Reserve concluded its two-day monetary policy meeting on Wednesday this week. The bank did what most analysts were expecting. It left its main interest rate unchanged between 0% and 0.25%. 

Also, as widely expected, the bank decided to slash the size of its monthly asset purchase program. The bank’s goal is to end the asset purchase program. 

The most important outcome of the Fed decision was Jerome Powell’s press conference. In it, the Fed Chair failed to rule out whether the bank will implement more rate hikes than those in the dot plot.

He argued that the bank could sound more aggressive this year if inflation remains stubbornly high. Therefore, analysts expect that the Fed will implement at least four hikes this year.

SARB interest rate decision

The USD/ZAR pair rose initially after the Fed delivered its interest rate decision. This price action was mostly because a hawkish Fed will have a negative impact on South Africa’s economy because of its vast dollar-denominated debt.

The next key catalyst for the South African rand will be the upcoming SARB interest rate decision. In it, analysts expect that the central bank will increase its interest rate by about 25 basis points to 4.0%. If this happens, it will be the fourth interest rate hike by the central bank. 

Recent data showed that South Africa’s inflation has jumped above the SARB target while the unemployment rate remains high. 

USD/ZAR technical analysis

The four-hour chart shows that the USD/ZAR pair has been in an overall bearish trend in the past few months. It has crashed by over 6.70% from its highest level in December. This drop makes the South African rand one of the best performing Emerging Market currencies. 

It has moved below the 25-day and 50-day exponential moving averages (EMA). Also, the pair has moved above the descending trendline that is shown in green. 

Therefore, there is a likelihood that the pair will continue its bearish trend this week. If this happens, the next key support level will be at 15.00.