The USD/ZAR price continued its upward trend as investors focused on the dimming outlook of the South African economy. The pair rose to a high of 17.80, which was substantially above the August low of 16.37. South African rand will next react to the upcoming interest rate decisions by the South Africa Reserve Bank (SARB) and the Federal Reserve.
South Africa’s economic outlook dims
The South African economy is under intense pressure as investors focus on the changing economic outlook, Recently, the country has struggled substantially due to a lingering energy crisis that has been going on for a while. As a result of these outages, the overall cost of doing business has risen substantially in the past few months.
At the same time, soaring interest rates have impacted the borrowing capacity of people and businesses. The South Africa Reserve Bank (SARB) has hiked interest rates several times this year and analysts expect that it will continue hiking this week. These rate hikes are necessary as the bank continues fighting the elevated inflation.
The USD/ZAR price has also rallied as the US dollar index (DXY) strength continues. The Federal Reserve is expected to continue hiking interest rates this week. Most analysts expect that the country will hike by 0.75% this week and hint that it will continue hiking in the coming months.
In addition, the USD to ZAR exchange rate will also react to the upcoming US housing data. Analysts expect that the country’s housing starts and building permits continued retreating in August of this year as interest rates rise.
The four-hour chart shows that the USD/ZAR price has been in a strong bullish trend in the past few weeks. It has surged above the important resistance levels at 17.28 and 17.54, which were the highest levels in July and September.
The pair has moved above all moving averages while the Relative Strength Index (RSI) has moved close to the overbought level. Therefore, there is a likelihood that the USDZAR price will continue rising as buyers target the important resistance level at 20. A drop below the support at 17.5 will invalidate the bullish view.