USD/ZAR: rand forecast after the South African inflation data

on Oct 19, 2022
  • The USD/ZAR price has jumped by more than 16% this year.
  • It rose after the strong South Africa inflation data.
  • South Africa published weak retail sales data.

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The USD/ZAR price rebounded on Wednesday after the strong South African consumer inflation data. It rose to a high of 18.24, which was close to the year-to-date high of 18.57. The South African rand has crashed by almost 16% this year.

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South Africa inflation data

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South Africa’s inflation remained at an elevated level in September as the cost of most items rose. According to the latest South African statistics agency, the headline consumer inflation data dropped from 0.2% in August to 0.1%. On a year-on-year basis, inflation dropped from 7.6% to 7.5% in September.

Meanwhile, excluding the volatile food and energy levels, inflation rose from 0.2% to 0.5%. This increase was higher than the median estimate of 0.2%. On an annualised basis, core inflation rose from 4.4% to 4.7% in September. 

Therefore, analysts believe that the South Africa Reserve Bank (SARB) will continue hiking interest rates when it meets this week. It has delivered several rate hikes this year. 

In September, the bank hiked rates by 75 basis points and brought the official repo rate at 9.75%. It has hiked rates by 275 basis points this year. Still, analysts believe that the bank is nearing the end of its rate hike cycle.

Additional data showed that retail sales rose by 2.0% in August, a sharp decline from the previous month’s 8.9%. The increase was smaller than the median estimate of 4.2%.

The next key forex news will USD/ZAR price will be the upcoming building permits and housing starts data. Economists expect the data to show that the housing starts dropped from 1.57 million to 1.47 million. Building permits are expected to have dropped from 1.54 million to 1.53 million.

USD/ZAR price forecast

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The daily chart shows that the USD/ZAR price has been in a strong bullish trend in the past few days. It has formed an ascending channel that is shown in blue. The current price is close to the upper side of this channel. It has moved above all exponential moving averages.

It has moved above the important resistance level at 17.28, which was the highest point on July 12. The pair has also moved above the 25-day and 50-day moving averages. Therefore, the USD/ZAR will likely continue rising as bulls target the key resistance at 19.0.


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