The USD/ZAR exchange rate rose for the fourth consecutive day as market participants reacted to the latest South African inflation data and the upcoming speech by Jerome Powell at the Jackson Hole Symposium in Wyoming. It rose to a high of 17.75, up from this month’s low of 17.47.
South Africa inflation is rising
The USD/ZAR exchange rate jumped after South Africa’s statistics agency published strong consumer inflation data.
In a report, the agency noted that the headline Consumer Price Index (CPI) rose from 0.3% in June to 0.9% in July. This surge brought the annual inflation rate to 3.5%, the highest point in the past 52 weeks.
Core inflation, which excludes the volatile food and energy prices, rose from 0.3% to 0.9% on a MoM basis. This increase translated to an annualized increase of 3%, higher than the previous month’s 3%’
These numbers mean that the South African Reserve Bank (SARB) will likely maintain its interest rate unchanged in the last monetary policy meeting as cutting will lead to higher inflation later this year.
The central bank slashed interest rates by 0.25% in the last meeting, bringing it to 7%, its lowest level since November 2022.
Most importantly, the central bank lowered its inflation target to 3%, rather than its wide range of between 3% and 6%. The central bank governor said:
“We have decided to aim for the bottom of our inflation target range, of 3%-6%. We welcome the recent moderation in inflation expectations and would like to see expectations fall further.”
The SARB is attempting to boost the country’s economic growth at a time when Donald Trump has boosted tariffs on goods from the country. These tariffs will hit goods worth billions of dollars and may impact the economic growth.
The next important catalyst for the USD/ZAR exchange rate is the upcoming speech by Jerome Powell at the Jackson Hole Symposium. This statement will likely have an impact on all dollar-based pairs as it will impact the next Fed meeting in September.
USD/ZAR technical analysis
The daily chart shows that the USD/ZAR pair is sending mixed signals ahead of Powell’s statement. On the positive side, it has formed a triple-bottom pattern at 17.47, with its neckline is at 18.35. This pattern means that bears are afraid to short below the support at 17.4.
On the negative side, the pair has remained below the 50-day and 100-day moving averages, a sign that bears are in control. Also, there are signs that the ongoing pullback is part of the bearish flag chart pattern, which leads to more downside.
Terepre, the most likely scenario is where the USD/ZAR exchange rate resumes the downtrend and hits the support at 17.47.
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