USD/ZAR: Implications of South Africa’s Inflation Data

USD/ZAR is trading higher by 0.14% after plunging in the previous session. Tuesday’s decline came as more Fed officials indicated that imminent tightening of the monetary policy is unlikely. On Monday, Atlanta Fed’s Raphael Bostic stated that the central bank will maintain low interest rates as the economic recovery is still uneven. Dallas Fed’s Robert Kaplan holds a similar opinion.

In today’s session, USD/ZAR will be reacting to the FOMC meeting minutes. The expected dovish tone is likely to curb the currency pair’s gains. At the same time, investors are focused on South Africa’s inflation data. Analysts expect consumer prices to have risen by 0.5% in April MoM compared to 0.7% in March. At an annualized rate, the predicted 4.3% is higher than the prior month’s 3.2%. Upon the exclusion of energy and food, economists forecast a core CPI reading of 0.1% MoM in comparison to 0.5% in March.   

USDZAR Technical Outlook

In the previous session, USD/ZAR dropped from 14.1224 to 13.9654. However, it has recouped some of those losses by trading at 14.0237, up by 0.14%. Despite the rebound, the outlook remains bearish. On a two-hour chart, the currency pair is trading below the 25 and 50-day exponential moving averages. Besides, the formation of a bearish pennant pattern signals probable curbing of the previous gains.  

I expect USD/ZAR to continue experiencing resistance at 14.0300 ahead of South Africa’s inflation data. Subsequently, the pair may drop to 13.9531, which has been an important support level in the current month. However, this thesis will be invalidated by a move above 14.0500.

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USD/ZAR Chart

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