USD/ZAR Price Analysis: Bulls lose steam ahead of Fed decision, South African data

• USD/ZAR declined towards 18.933, near the 20-day SMA.
• South Africa reports August Inflation figures and July Retail Sales on Wednesday.
• Federal Reserve (Fed) is expected to pause but leave the door open for further hikes.

 In Tuesday’s session, the USD/ZAR faced some selling pressure and declined to 18.933, down by 0.25%, and seems to be on its way to retest the 20-day Simple Moving Average at 18.880.

All eyes are on Wednesday. South Africa reports the August Consumer Price Index (CPI) with the headline figure expected to increase slightly to 4.8% YoY, while the core inflation rate is anticipated to remain stable at 4.7% YoY. Retail Sales from July are expected to come in at -1.0% YoY, compared to the 0.9% YoY decrease in June. Regarding the South African Reserve Bank meeting on Thursday, the decision will likely be to maintain its interest rates at 8.25% despite some previous expectations of a hike. As for now, for the next twelve years, markets aren’t foreseeing any hikes and discounts that the bank will maintain rates at 8.25%.

On the Fed’s side, Markets expect the bank to keep rates steady at 5.25-5.50%, but Chair Powell will likely show a hawkish tone and signal future rate hikes which could benefit the USD. Strong US economic performance, especially in services, and a mixed labour market suggest the Fed may leave room for one more hike to curb inflation risks.

USD/ZAR Levels to watch 

 The daily chart shows signs of bullish exhaustion for USD/ZAR. The Relative Strength Index (RSI) indicates a neutral stance above its midline, displaying a flat slope in the positive territory, while the Moving Average Convergence (MACD) presents neutral red bars. On the bigger picture, the pair is above the 20,100,200-day Simple Moving Average (SMA), suggesting that the bears are struggling to challenge the overall bullish trend.

 Support levels: 18.880 (20-day SMA), 18.728 (100-day SMA). 18.500.

 Resistance levels: 19.000, 19.050, 19.150.

 USD/ZAR Daily Chart