Pound to rand (GBP/ZAR) forms double-top ahead of SARB decision

July 19, 2023 06:45 PM PDT | By Invezz

Pound to rand (GBP/ZAR) forms double-top ahead of SARB decision — Image source: Invezz

SARB rate decision ahead

The biggest forex news this week so far was Wednesday’s UK inflation numbers, which I covered here. These numbers revealed that the country’s inflation dropped at a faster pace than initially expected.

The headline consumer price index (CPI) dropped from 8.7% in May to 7.9% in June. Excluding the volatile items, the figure dropped to 6.9%, signaling that inflation is decelerating. Still, these numbers reinforced the view that the Bank of England will hike by 0.25% in the next meeting.

South Africa’s inflation is also slowing, helped by the strong rand. The main consumer price index dropped to 5.4% while the core CPI fell to 5.4%. The stronger rand has made it relatively cheaper for the country to fund imports like crude oil.

The next important catalyst for the GBP/ZAR exchange rate will be the upcoming interest rate decision by the South African Central Bank (SARB).

Economists expect that the central bank will leave interest rates unchanged at 8.25% for two reasons. First, inflation has fallen to its targe range, which is an encouraging sign. Second, leaving rates intact will help to support the economy’s recovery.

SARB, like other central banks, has been hiking interest rates since November 2021 when rates stood at 3.50%.

GBP/ZAR technical analysis

GBPZAR chart by TradingView

The 1D chart shows that the pound to rand exchange rate formed a double-top pattern at 24.51 this year. In price action analysis, this pattern is usually a bearish sign. The pair has now moved slightly below the neckline of this pattern.

At the same time, the 25-day and 50-day moving averages are about to form a bearish crossover pattern. The Stochastic Relative Strength Index (RSI) has moved below the oversold level. Therefore, the GBP/ZAR pair will likely continue falling as sellers target the key support at 22.

The post Pound to rand (GBP/ZAR) forms double-top ahead of SARB decision appeared first on Invezz.

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