South African Rand Dollar Price Forecast: USD/ZAR Inflationary Battle Persists Ahead of SARB and FOMC

USD/ZAR Talking Points:

• USD/ZAR lingers around Key Psychological Level of 14.00
• US Dollar weakness and rising commodity prices have supported the ZAR’s bullish narrative
• Fundamentals may further catalyze price action ahead of FOMC and SARB announcements

The South African Rand has maintained its strength against major currencies as the US Dollar struggles to recover. With risk sentiment currently supporting Emerging Market (EM) currencies, rising commodity prices have further assisted in the catalyzation of price action, allowing the volatile Rand to maintain its bullish narrative, at least for now.

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USD/ZAR Price Setups

USD/ZAR price action currently remains trapped in a well-defined range between key Fibonacci levels of the 2021 move. After falling below critical support, which continues to hold at the key psychological level of 14.00, USD/ZAR bulls made a concerted effort to drive prices higher, but Dollar weakness has hindered their ability to regain control of the systemic, prominent trend.

After bouncing off support, prices have temporarily stalled at the 14.4% retracement level of 14.19, with the next level of resistance residing at the 23.6% retracement level at 14.35. Although the formation of a Doji candle is suggestive of indecision, the Moving Average Convergence/Divergence (MACD) remains below the zero line but a potential crossover appears to be looming.

USD/ZAR Daily Chart

Chart prepared by Tammy Da Costa, IG

USD/ZAR Fundamentals

With global inflationary concerns gaining traction, this week’s economic calendar has the potential to jeopardize the Rand, if the South African Reserve Bank (SARB) or the Fed delivers any unexpected surprises.

DailyFX Economic Calendar

Although both SARB and the FOMC are expected to reiterate their dovish stance, South Africa has a long way to go before sustainable economic growth can be achieved. As the country’s vaccine rollout continues to lag behind many developing nations, the probability of a third way and rising government debt are additional concerns that need to be addressed in order for the Rand to maintain its current trajectory throughout its winter.

--- Written by Tammy Da Costa, Market Writer for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707