USD/ZAR Forecast: An Interplay of SA Inflation and US GDP Data

The USD/ZAR is down for the third straight day, with the correction picking up on Wednesday and early Thursday following the acceleration in consumer inflation in South Africa. Data released on Wednesday showed an uptick in monthly and annualized consumer price index figures, with the Core CPI (monthly) for July coming in at 0.7% (consensus of 0.6%).

This was a percentage point higher than the previous month’s number and translated to an annualized increase of 4.6% (consensus of 4.5% and the previous number of 4.4%). The headline CPI numbers also rose above expectations, with the monthly and annualized numbers coming in at 1.5% and 7.8%, respectively.

The consensus of economists showed an expectation of 1.4% and 7.7%, respectively, while the last numbers stood at 1.1% and 7.4%, respectively. Thursday sees the release of the Producer price index data. These data will have to hold up against preliminary GDP data from the US to be released later Thursday.

The Jackson Hole Symposium, which features speeches from several policymakers of the US Federal Reserve, also opens today. The highlight of this event is Friday’s speech by Fed Chair Jerome Powell, which comes as Fed Funds traders are allocating a 61% probability of the Fed raising interest rates at its September meeting by 75bps. These data will provide the fundamental triggers for the USD/ZAR for the rest of the week. 

USD/ZAR Forecast

The rejection of the price action at the 17.10121 resistance level (22 July and 22 August highs) has initiated a correction with a downside violation of the 16.98867 support level (19 July low and 26 July high). This corrective decline has put the bears on a collision course with the 16.86383 support level (14 July low and 5 August high).

A breakdown of this support allows the bears to aim for 16.66526 and 16.50086 as potential harvest points. The latter is also where the ascending trendline is expected to reinforce the support. Conversely, a bounce on any of the mentioned support levels allows the USD/ZAR to resume the uptrend.

This move targets a break of the 17.10121 top and the confluence of highs at 17.21925. A break of these 14-22 July highs restores the uptrend and allows the bulls to aim for multi-year highs at 17.51252 (25 June 2020 and 18 August 2020 highs). The 17.74297 price barrier becomes available if the bulls overcome the 17.51252 barrier. 

USD/ZAR: Daily Chart