The South African rand sharply rose to its highest in five months with increasing rate hike expectations. The USD/ZAR pair is trading at 14.49, more than 7% below its highest this month. A similar trend was noted with EUR/ZAR and GBP/ZAR.

South African rand momentum

Recently, the rand has been a top performer outrunning developed and emerging market currencies like the Russian ruble and Turkish lira.

The first reason for this performance is the current Ukraine crisis, pushing significant commodity prices like gold, platinum, and palladium sharply higher. This policy favored South Africa as the main source of commodities.

Yet, the crisis has been net negative due to commodity volume imported by Australia, like crude oil and natural gas.

Secondly, the USD/ZAR pair has been affected by the current hawkish policy of the South Africa Reserve Bank (SARB). The bank is implementing two hikes in a bid to fight inflation.

According to the bank’s initial reports, it may deliver more rate hikes soon since inflation continues to rise.

Another significant catalyst will be Thursday’s South African unemployment report. Analysts predict a steady country rate above 34%

The pair will also react to the upcoming jobs data from the United States. Analysts expect the data to show that the economy added over 500k jobs while the unemployment rate fell to 3.7%.

The pair will be affected by the US jobs data. A 500K Job increase is expected with a 3.7% unemployment rate drop.

USD/ZAR forecast

The USDZAR pair has been in a steady bearish trend in the past few months. This trend accelerated when the pair moved below the support at 14.92, which was the lowest level on February 17th. It has also moved below the 25-day moving average.

By subtracting the top level of 15.56 and 14.92, we can estimate the next key support level to watch will be at about 14.22. This price is about 1.91% below the current level.

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