USD/ZAR challenges four-day lows near 15.20

The South African Rand keeps gaining momentum on Wednesday and is dragging USD/ZAR to fresh multi-day lows in the 15.20 region.

USD/ZAR retreats from 2019 highs

After recording new yearly highs just below 15.50 on Monday, the pair sparked a move lower in response to renewed buying interest in the Rand.

Data wise today, inflation figures in South Africa showed headline consumer prices rose 0.4% on a month to July and 4.0% over the last twelve months. Prices stripping food and energy costs increased 0.4% inter-month and 4.2% from a year earlier, all prints coming in below expectations.

Despite inflation figures came in below estimates today, the CPI continues to run well within the 3%-6% target. However, the recent sharp depreciation of the Rand could temper the SARB intentions to cut rates in order to boost the economy and face the global financial dovishness.

Later today, the FOMC will publish its minutes from the last meeting. The Greenback is expected to be in centre stage on the potential divided stance from the Committee over the Fed’s rates path. On Friday, all the attention will on the speech by Chief J.Powell at the Jackson Hole Symposium.

What to look for around ZAR

The Rand met strong resistance in the 13.80 region vs. the Greenback soon after the SARB reduced its key rate to 6.50% at its July meeting disappointing investors’ expectations of a larger move on rates. The central bank justified its decision in response to projections of lower inflation and GDP growth in the next periods. The generalized view that potential Fed easing could spark fresh inflows into the EM FX universe could not apply for ZAR, as political corruption within the ruling ANC party carries the potential to undermine President Ramaphosa’s position and the ability to push for vital structural/economic reforms in the country.

USD/ZAR levels to consider

As of writing spot is losing 1.24% at 15.1745 and faces the next support at 15.0850 (low Aug.13) seconded by 14.8518 (21-day SMA) and then 14.2340 (200-day SMA). On the flip side, a break above 15.4979 (2019 high Aug.19) would aim for 15.4990 (high Aug.13 2018) and finally 15.6935 (2018 high Sep.5).