- USD/ZAR price plunged to its lowest mark since 29 June.
- The U.S announced weak producer and consumer inflation data.
- South Africa’s production declined steeply in June.
USD/ZAR price plummeted to the lowest mark since 29 June as market players concentrated on the weak U.S consumer inflation numbers. The pair plunged towards the 16.12 lows, nearly 6.50% beneath its 14 June high.
Risk-on Sentiment
The USD-ZAR price plummeted after the BLS (Bureau of Labor Statistics) announced the recent United States inflation data.
The data showed the nation’s inflation plunged discreetly in July, following retraced gasoline prices. The month saw gasoline prices averaging around $4.20, well below last month’s $5.
More numbers on Thursday indicated that the PPI (producer price index) moved to July’s -0.5% from June’s 1.0%. It declined to 9.3% from 11.3% Y/Y.
Thus, the dollar index plunged as investors forecasted that the Fed would reduce the rate hike pace. The central bank has already increased the interest rate by 225bp and confirmed further tightening.
Federal officials trust that further tightening remains essential. Mary Dal told FT that the Federal Reserve wouldn’t be complacent as far as inflation is concerned. Thus, she supports multiple hikes in the remaining year. Other Fed officials such as Charles Evans and Neel Kashkar repeated that narrative.
USD/ZAR also declined after worrying financial numbers from South Africa. The nation’s statistics agency revealed that manufacturing production slumped from May’s 0.2% to June’s -1.5%. That drop remained worse than the -0.5% median estimate. It led to a Y/Y 3.5% drop.
Meanwhile, the SARB (South African Reserve Bank) might keep hiking rates. The bank executed a 0.75% hike in July, the highest increase in several years. That increase saw the headline repo rate hitting 5.5%. It also confirmed more hikes to combat the stubborn inflation.
USD/ZAR Prediction
According to the 4hr chart, the USD/ZAR pair declines massively after the weak U.S inflation data. Meanwhile, the decline saw it moving beneath the curial 16.31 support – 16 May’s highest level.
Also, USD-ZAR dropped below the 24 and 50 Moving Averages, whereas the MACD moved beneath the neutral mark. The pair might keep declining, with sellers targeting the resistance floor at 15.50. a move beyond the 16.50 resistance will cancel the bearish view.