The USD/ZAR exchange rate rose for four consecutive days, reaching its highest level since July 16. It has jumped by 2.35% from its lowest point this month. This article explores what to expect ahead of the Federal Reserve, key macro data, trade deadline, and South African interest rate decision.
Federal Reserve decision ahead
The first main catalyst for the USD/ZAR this week will be the upcoming Federal Reserve interest rate decision on Wednesday.
Economists expect the bank to continue pausing its interest rates between 4.25% and 4.50%, where they have been throughout the year.
By continuing to pause, the bank will be defying Donald Trump and asserting its independence. Trump has called for the bank to cut rates by as much as 300 basis points to supercharge the economy.
Fed officials believe that cutting now will be wrong as inflation remains significantly above the 2% level. There are also signs that inflation is starting to go up as it jumped from 2.4% to 2.7% last month.
The main interest rate decision will not be the primary driver of the US dollar. Instead, investors will react to the Fed’s dot plot, which shows the interest rate expectations in the US. It will also react to Jerome Powell’s press conference.
Key US economic data ahead
The USD/ZAR exchange rate will also react to the upcoming economic data from the United States. The Conference Board will publish its latest consumer confidence report, providing further insight into the economy.
Economists believe the data will show that consumer confidence rose in July as the labor market improved, with the unemployment rate falling to 4.1%.
The Bureau of Labor Statistics (BLS) will publish the latest JOLTs job vacancies in the United States. The US will also release the latest house price index report.
More data will come out on Wednesday, when the US publishes the first estimate of the second-quarter GDP data. Economists believe that the bank’s growth rebounded in the second quarter after plunging by 0.5% in the previous one.
The other key data to watch will be the personal consumption expenditure (PCE) on Thursday and the nonfarm payrolls (NFP) data on Friday.
South Africa interest rate decision
The other catalyst for the USD/ZAR will come from South Africa, where the central bank will publish its interest rate decision. Economists expect the bank to leave interest rates unchanged at 7.25%. It has been in a rate-cutting cycle, moving from last year’s high of 8.25%.
Some analysts believe that the bank may cut rates after South Africa published weak inflation data. The report showed that consumer prices rose 3% in June, lower than the expected 3.1%. In a note, Elna Moolman. An analyst from Standard Bank said:
“It also arguably supports the case for the Reserve Bank to cut rates further at the upcoming MPC meeting next week. We do expect inflation to continue trending higher in the coming months but it should remain reasonably benign.”
The other key catalyst for the USD/ZAR pair will be the upcoming trade deadline. Trump will impose a 30% tariff on South Africa, which is expected to have a significant impact on the economy.
USD/ZAR technical analysis
USDZAR price chart | Source: TradingView
The 12-hour chart shows that the USD to ZAR exchange rate formed a double-bottom pattern at 17.50 and a neckline at 17.96, its highest point in July. It is trading slightly below the 23.6% Fibonacci Retracement level.
The pair moved above the 50-period moving averages, while the Relative Strength Index (RSI) and the MACD continued rising. Therefore, the pair will likely continue rising as bulls target the 50% retracement at 18.7.
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