USD/ZAR forms rising wedge ahead of Fed and SARB decisions

September 19, 2023 06:04 AM PDT | By Invezz

USD/ZAR forms rising wedge ahead of Fed and SARB decisions — Image source: Invezz

SNB and Fed rate decisions

The US dollar and the South African rand will be in the spotlight this week because of important economic events. The first one will be the latest South Africa consumer inflation data scheduled for Wednesday.

Economists polled by Reuters expect the numbers to show that South Africa’s inflation rose slightly in August as the cost of fuel rose. Brent has risen by almost 30% from the lowest level in June, leading to higher cost of living.

The most important catalyst for the USD/ZAR pair will be the upcoming Federal Reserve decision. As I wrote here, economists believe that the bank will decide to leave interest rates unchanged between 5.25% and 5.50%.

The Fed will be looking at several important factors. While inflation has risen, there are signs that the economy will slow in the coming months. Many automobile workers have gone on strike, millions of people will start paying their student loans, and there are risks of a government shutdown.

The other crucial USD/ZAR news will be the upcoming rate decision by the South Africa Reserve Bank (SARB). Unlike other central banks, SARB is in no mood for hiking and cutting rates. Besides, South Africa’s inflation has moved back to its 3%-6% target. Instead, traders will want to hear any signs of a rate cut in the coming months.

USD/ZAR technical analysis

The USD to rand exchange rate has been in a strong bullish trend in the past few months. In this period, it has risen from 17.43 (July low) to the current 18.95. The pair has remained above the 25-day and 50-day moving averages.

Most importantly, the pair has formed a rising wedge pattern. In price action analysis, this pattern is one of the most popular bearish signs. This pattern has more room to go. Therefore, the outlook for the pair is neutral with a bullish bias. The key level to watch will be at 19.34.

The post USD/ZAR forms rising wedge ahead of Fed and SARB decisions appeared first on Invezz.

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