USD/ZAR navigates session lows near 14.63 post-CPI results

• USD/ZAR drops to 2-day lows in the sub-14.63 area today.
• SA CPI came in higher than expected in August.
• The SARB will decide on rates on Thursday.

The South African Rand is trading on a positive note on Wednesday and is now dragging USD/ZAR to the area of new 2-day lows around 14.63.

USD/ZAR weaker post-CPI, looks to SARB

ZAR has gathered extra pace today after inflation figures tracked by the CPI surpassed estimates for the month of August. In fact, tracked by the CPI, consumer prices rose 0.3% inter-month and 4.3% from a year earlier. In addition, prices excluding food and energy costs rose 0.1% MoM and 4.3% on a yearly basis.

After bottoming out in monthly lows in the mid-14.00s, spot has managed to regain some buying bias although the upside looks limited around the Fibo retracement near 14.8540.

Tomorrow, the SARB will hold its monetary policy meeting and consensus among investors remains pretty divided between a 25 bps rate cut and leaving rates unchanged at 6.50%.

What to look for around ZAR

The Rand has been appreciating for the last four weeks, taking spot to as low as the 14.50 region earlier in the month. The SARB decision on Thursday is considered a close call. Economic activity and recent fundamentals point to a weaker performance during the July-September period. If we add the persistent uptrend in unemployment figures, the idea of further monetary easing looks somewhat convincing when comes to benefit the economy. However, inflation has been on the rise despite August’s CPI showed consumer prices remained within the middle of the 3%-6% bank’s target. This could be deemed as a key factor against a rate cut at tomorrow’s meeting.

USD/ZAR levels to consider

As of writing spot is losing 0.44% at 14.6345 and faces the next support at 14.5742 (100-day SMA) seconded by 14.5036 (monthly low Sep.13) and then 14.3316 (200-day SMA). On the flip side, a break above 14.8430 (high Sep.17) would open the door to 14.9604 (21-day SMA) and finally 15.0999 (23.6% Fibo of the July-August rally).