USD/ZAR: Hawkish Fed, Disappointing Retail Sales Hit Rand

The South African Rand hit a 4-week low on the back of the hawkish Fed projections and lower-than-expected retail sales data. This has allowed the USD/ZAR to extend its corrective rally towards the 14.03 price level.

On Wednesday, the Fed surprised the market with hawkish projections as it finally acknowledged that the inflation rate for 2021 would exceed its earlier target of 2%.

The Fed’s Chief Jerome Powell also indicated that the conditions for the lift-off of interest rates were on course to being fulfilled earlier than policymakers had once thought. As a result, the greenback strengthened at the expense of emerging market currencies such as the Rand.

Disappointing retail sales also weighed on the Rand, coming in at 95.8% year-on-year when the markets had expected a reading of 99.7% in April. With the carry trade appeal now waning, the USD/ZAR now trades at 14.1046, up 0.64% on the day.

Technical Levels to Watch

The USD/ZAR has hit resistance at 14.15360 (previous lows of 15/16/29 April). Further advance on the pair requires the bulls to take out this price mark, targeting 14.28370 initially, and 14.39768 and 14.52955 as sequential upside targets. 

On the other hand, rejection at the 14.15360 resistance and a subsequent pullback enables the pair to resume the downtrend, targeting 13.97151 and 13.80403 (15 July 2019 low) as initial downside targets. Other targets to the south lie at 13.51405 and 13.37130 (7 June low). 

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USD/ZAR Daily Chart

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