USD/ZAR analysis: South African rand has more room to run

The South African rand strength accelerated to the highest point in five months as rate hike expectations rose. The USD/ZAR pair is trading at 14.49, which is more than 7% below its highest level this month. The same trend happened in other pairs like EUR/ZAR and GBP/ZAR.

South African rand momentum

The rand has been one of the best-performing currencies in the past few months. It has even outperformed most developed and emerging market currencies like the Russian ruble and Turkish lira.

This performance is mostly because of two main reasons. First, the ongoing crisis in Ukraine has helped to push the prices of key commodities like gold, platinum, and palladium sharply higher. This price action has been positive for South Africa, which is a major source of these commodities. 

However, in this regard, the crisis has been net negative because of the volume of commodities that Australia imports like crude oil and natural gas. 

Second, the USD/ZAR pair has declined sharply because of the ongoing rate hikes by the South Africa Reserve Bank (SARB). The bank has delivered two rate hikes as it accelerated its battle against inflation. 

And based on the bank’s previous statements, there is a likelihood that it will implement more rate hikes this year considering that inflation is still rising.

The next key things that will move the USD/ZAR price will be the upcoming South African unemployment rate data scheduled for Thursday. Analysts expect the data to show that the country’s rate remained steadily above 34%. 

The pair will also react to the upcoming jobs data from the United States. Analysts expect the data to show that the economy added over 500k jobs while the unemployment rate fell to 3.7%.

USD/ZAR forecast

The USDZAR pair has been in a steady bearish trend in the past few months. This trend accelerated when the pair moved below the support at 14.92, which was the lowest level on February 17th. It has also moved below the 25-day moving average.

By subtracting the top level of 15.56 and 14.92, we can estimate the next key support level to watch will be at about 14.22. This price is about 1.91% below the current level.