The South African rand gains momentum this week as investors focus on the upcoming meeting between Donald Trump and Cyril Ramaphosa in Washington. The USD/ZAR exchange rate crashed to a low of 17.90 on Wednesday, its lowest level since December 17 last year.
Will the US and South Africa reset relationship?
The USD/ZAR exchange rate will be in the spotlight on Wednesday as Ramaphosa goes on a charm offensive in Washington. He will meet with Trump, a president who has continued to criticize the country for what he believes to be discrimination against white people.
Trump has gone as far as offering asylum to Afrikaners. He also stopped USAID funding to the country and promised sanctions if the law was not repealed.
The law under question aims at settling some historical land-ownership issues. Like in other countries, it makes it possible for the government to take underutilized land and give it to other South Africans.
To do that, the government must compensate the landowner at the market rate. This law is different from that that opposition leaders have proposed, whereby the government takes the land without paying the owners.
South Africa is using several approaches to change Trump’s views. For example, Ramaphosa has traveled with Ernie Els, a popular golfer who Trump knows well. Also, the country is willing to let Elon Musk’s SpaceX provide internet solutions by waiving some of the local ownership laws.
Therefore, the ongoing USD/ZAR crash is a sign that investors hope that the visit will lead to better relations between the two countries. They also hope that the US will lower the reciprocal tariffs it implemented in April.
Other factors affecting the USD to ZAR exchange rate
Other factors are moving the USD/ZAR exchange rate today. First, the pair has dropped because of the ongoing US dollar crash. The US Dollar Index has crashed as investors fleed from the greenback following the recent Moody’s credit rating downgrade.
Analysts are worried that the US dollar will lose its appeal as a safe-haven currency as the debt load jumps. This also explains why US equities have pliunged this week, with the Dow Jones futures falling by 175 points and the S&P 500 Index ones falling by 30 points.
The USD/ZAR pair will also react to the upcoming South African inflation data. Recent data showed that the headline consumer inflation dropped to 2.7% in March from the previous 3.2%. Economists expect the upcoming data to show that inflation dropped to 2.5%, inside the target range of the South African Reserve Bank (SARB).
SARB has delivered several interest rate cuts since last year, moving it from a high of 8.0% to the current 7.50%. Analysts at Bank of America expect two more cuts this year, while others see three as the tariff impact bites.
USD/ZAR technical analysis
USDZAR price chart | Source: TradingView
The daily chart shows that the USD to ZAR exchange rate has been in a strong bearish trend in the past few weeks. It has moved from a high of 19.93 on April 9 to the current 17.96.
The pair moved below the key support at 18, the lowest swing on March 18. It is also about to form a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA). This cross is one of the most bearish signals in technical analysis.
The Relative Strength Index (RSI) and the Stochastic Oscillator have continue falling. Therefore, the USD/ZAR pair will likely continue falling as sellers target the key support at 17.62, the lowest point on December 12.
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