USD/ZAR forecast: South African rand future looks bright for now

By:
on Mar 12, 2024
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  • The USD to rand pair has retreated sharply in the past few weeks.
  • South Africa’s economy is doing relatively well ahead of election.
  • Eskom and Transnet challenges are easing this year.

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The South African rand has staged a strong comeback as investors cheer the ongoing recovery of the economy. The USD/ZAR exchange rate retreated to a low of 18.65, much lower than last year’s high of 19.92. 

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South Africa’s economy is improving

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The South African rand has rebounded, helped by the ongoing improving dynamics in the country’s economy.

There are signs that the power crisis will improve now that more companies are building energy projects in the country. The expectation is that over 10 megawatts of power will come online in the coming years.

There are signs that the transport industry will improve, with experts saying that the worst may be over. Transnet, the giant company that runs its railway and ports, has a new Chief Executive and is working to fix its business.

Transnet and Eskom are two of the most important South African companies and have contributed to its current economic crisis.

Meanwhile, the government seems to be reigning on spending, as evidenced by the recent budget. This budget did not lead to a significantly higher explosion of public debt. The total debt to GDP to ratio is expected to hover around 75% of GDP. 

To be clear. South Africa is still going through an economic crisis, with the unemployment rate sitting above 33%. 

The mining sector is also going through woes, with big companies like Sibanye Stillwater, Anglo American Platinum, and Northam Platinum have announced huge layoffs recently. The number of platinum workers are expected to drop from last year’s high of 182k to less than 170k. 

South Africa’s gold production has also been in a strong decline over the years. After peaking at over 160k kilograms in 2013, the country produced about 100k kilograms in 2023. Gold production has dropped in the past two straight months. 

The USD/ZAR exchange rate has also dropped as investors react to the actions of the South Africa Reserve Bank (SARB). 

The bank has expressed caution about the pace of rate cuts even as inflation has remained inside the SARB target. Recent data showed that inflation rose to 5.3% in January, inside the bank’s target of between 4.5% and 6.0%.

USD/ZAR technical analysis

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USD/ZAR

USD/ZAR chart by TradingView

The USD to ZAR exchange rate has come under intense pressure in the past few days. It has retreated from the year-to-date high of 19.40 to a low of  18.68. 

The pair has moved below the ascending trendline, which connects the lowest levels since December 18th. It has also retreated below the 50-day and 25-day Exponential Moving Averages (EMA). 

The Percentage Price Oscillator (PPO) has moved below the neutral point while the pair has formed a bearish pennant pattern. Therefore, the USD to rand pair will likely continue falling as sellers target the next important support at 18.10, the lowest swing on December 15th.

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