The USDZAR currency pair has taken traders on a wild financial safari in recent weeks, reaching record highs in a turbulent environment. While traders have caught their breath in the opening days of this week, the currency pair could be gearing up for another thrilling week, with a slew of vital economic releases that could show traders the true stripes of the USDZAR. 

Following the massive surge in bullish volume after allegations from the US that Russian ships were picking up weapons from South Africa to aid their war in Ukraine, the currency pair has stabilised, mainly due to the relief that S&P Global decided not to downgrade South Africa’s credit rating. On Wednesday, the South African inflation moderated to 6.8%, while the market expected a 7% print, down from the prior 7.1%. Month-on-month inflation decelerated to 0.4%, lower than the 0.5% consensus from the previous 1%. While these numbers are softer than expected, inflation remains above the 3%-6% target, which could see the South African Reserve Bank (SARB) raise their interest rates by at least 25bps in tomorrow’s monetary policy meeting. 

However, while Rand strength is expected in the upcoming days, the greenback has some tailwinds of its own, as Federal Reserve officials lean more to the hawkish side. With the FOMC minutes due later today, the currency pair could be bracing for another volatile end to the week. 

Technical 

The 1D chart shows the tumultuous trading conditions in recent weeks, with the bulls sustainably breaking through the ascending triangle toward the highs at 19.5131. Since then, the Rand has found its footing, with bets of another aggressive interest rate hike triggering a slight retracement toward the daily pivot point at 19.2261. 

If the FOMC minutes reveal a hawkish tone, the greenback strength could see the currency pair re-attempting last week’s highs. Resistance at 19.4590 stands in the bulls’ way of retesting the 19.5131 level, where the market hesitated previously.  

However, the SARB decision could aid the Rand, enforcing further downside pressure on the currency pair. An aggressive hike above 25bps could trigger a selloff, where the 38.2% and 50% Fibonacci retracement levels at 18.8914 and 18.7173, respectively, could prevent the bears from legging down to the breakout point of the ascending triangle at the Fibonacci golden ratio of 18.5431. 

Summary 

The USDZAR currency pair is taking a breath after a whirlwind in recent weeks. However, the flat trading range could be temporary as the FOMC minutes and SARB interest rate decision looms, which could result in another thrilling adventure in the tale of the currency pair. The bulls would hope for hawkish FOMC minutes to push toward 19.5131, while the bears would wish for the opposite on a SARB interest rate hike to further retrace the gains toward 18.8914. 

Sources: Koyfin, Tradingview