USD/ZAR forecast ahead of the South Africa inflation data

The USD/ZAR price has been in a bearish trend in the past few weeks as investors focus on the Ukrainian crisis. The pair is trading at 15.11, which is about 7.7% below the highest level in December last year.

South African inflation data

The USD/AR tilted lower ahead of the upcoming South African consumer price index (CPI) data that is scheduled for Wednesday. 

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Economists polled by Reuters expect the data to show that South Africa’s inflation eased slightly in January even as energy prices remained at elevated levels.

Precisely, analysts polled by Reuters predict that the headline CPI declined from 0.6% in December to 0.2% in January. On a year-on-year basis, they expect the data to show that inflation declined from 5.9% to 5.7% in January.

Meanwhile, the core CPI, which excludes the volatile food and energy prices, is expected to decline from 0.3% to 0.2%. They predict that the figure rose to 3.5% on a year-on-year basis. 

These numbers imply that South Africa has a lower rate of inflation than the US. If they manage to decline slightly, they will signal that the actions of the country’s central bank (SARB) are working. 

Like many emerging market central banks, SARB has embraced a more hawkish tone and delivered several rate hikes.

The USD/ZAR pair has also retreated as fears of the Omicron variant wane. In the past few months, the number of Covid cases in South Africa has been in a downward trend. As a result, activity in most cities has normalized.

The next key catalyst for the pair will be the upcoming US retail sales data. Economists expect the numbers to show that retail sales rose in January after dropping in December. South Africa will also publish its retail sales data.

USD/ZAR forecast

The four-hour chart shows that the USD/ZAR pair has been in a strong bearish trend in the past few weeks. It has fallen by about 7.7% from the highest point in December. 

Along the way, the pair has moved below the 25-day and 50-day moving averages. It has also moved below the descending trendline that is shown in blue while the Stochastic Oscillator has also dropped.

Therefore, the pair will likely keep falling before and after the latest South Africa inflation and retail sales numbers. If this happens, the next key support to watch will be at 14.98.

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