The USD/ZAR exchange rate continued rising, reaching a high of 16.64 on Friday, up by 4.70% from its lowest level in August this year. The pair has some highly bullish technicals, suggesting that it can continue rising as crude oil prices jump.
South African Rand Slips as Crude Oil Prices Jump
The USD/ZAR pair is rising as investors react to the rising energy prices . Brent, the global benchmark, is trading at $113, while the West Texas Intermediate (WTI) has risen to 103.70.
Oil prices may continue rising in the coming days as the US plans new attacks against Iran after the midterm elections. Trump may decide to launch the attack if Republicans lose as a distraction strategy. If Republicans win, it will be a sign of approval, which will push him to escalate the attacks.
South Africa’s economy is being affected by the rising oil prices because of the impact on inflation. Recent data shows that the headline consumer inflation rose 4.5% in September after rising 4.4% in August and 4.3% in the previous month. Inflation has continued moving further away from the central bank’s target of 3%. Therefore, there is a risk that the bank will decide to hike interest rates in the coming meetings.
The USD/ZAR pair is also reacting to the latest Federal Reserve interest rate decision in which officials decided to leave rates unchanged between 3.75% and 4%. Two officials voted to hike interest rates, pointing to the elevated inflation rate in the country. Therefore, there is a risk that the Fed will also hike interest rates in the next meeting, which explains why the US dollar has jumped.
USD/ZAR Technical Analysis
USDZAR chart | Source: TradingView
On the charts, we see that the USD/ZAR pair rebounded after bottoming at 15.90 in August and then started bouncing back. It has continued forming a series of higher highs and higher lows. Most recently, it retreated to 16.3 after reaching a high of 16.75.
Now, the pair is rebounding and slowly approaching the resistance level of 16.7. A move above that level will point to more gains as it will be a sign that it has invalidated the double-top pattern. If this happens, the next important target to watch will be at 17. A drop below the support level of 16.50 will invalidate the bullish outlook.
The post USD/ZAR Forecast: South African Rand Nears Crucial Level appeared first in UK on InvestingCube .
