South African Rand Forecast Weekly: USD/ZAR Ignores Gold and Breaks Key Support, More Losses Ahead

Quick overview

Thanks to higher SARB foreign exchange reserves and a more positive economic outlook, the South African rand kept rising last week.

Rand Strengthens as Market Sentiment Shifts in Its Favor

The South African rand continued its advance, posting notable gains to close the week at 17.7803 against the US dollar. Monday alone saw the rand appreciate by 0.7%, reaching a low of 17.7650—its strongest level since mid-December 2023.

This performance marks a more than 11% rebound from April’s lows and highlights the renewed investor optimism surrounding emerging markets, with South Africa benefiting from both internal and external tailwinds.

Gold Chart Weekly – Breaking Below the 200 SMA

GOLD has played a key role in supporting the rand. As global gold prices remain elevated, they bolster South Africa’s trade position, giving added strength to the ZAR. Last week there was a pullback in Gold prices, but the Rand didn’t mind that, which strengthens it’s position further.

Boost from Reserves and Policy Developments

Additional support came from a rise in South Africa’s net foreign reserves, which climbed to $64.804 billion by the end of May, up from $64.318 billion the month before. These improved reserves, confirmed by the South African Reserve Bank (SARB), further reinforce the rand’s underlying stability and attractiveness to foreign investors.

Meanwhile, political clarity appears to be improving. A parliamentary committee recently endorsed the government’s proposed fiscal framework and revenue measures for the coming year, setting the stage for a crucial lower-house budget vote on June 11. This step adds a layer of predictability to the policy landscape, often seen as a prerequisite for sustained investor confidence.

Equities Rebound and Technical Breaks Signal More Gains

The domestic stock market has also reflected improved sentiment. The JSE Top 40 Index surged to a new high of ZAR 89,130, marking an impressive 25% rally from its lows earlier in the year. Many of the index’s constituents have posted robust gains, a sign of broad-based equity market strength.

From a technical standpoint, the USD/ZAR currency pair has now broken decisively below the psychologically important R18.00 level. Although there was a brief push above that threshold on Friday, strong resistance at the 20-day simple moving average halted further advances. Importantly, last week also saw a break below the 200-week simple moving average, suggesting a possible continuation of the downtrend. If current momentum holds, the next downside targets include R17.50 and eventually R17.00.

Conclusion: The rand’s rally is being driven by more than just a shift in sentiment—it is underpinned by improving reserves, gold-related trade advantages, and political developments that support policy stability. Despite weak manufacturing signals, the broader backdrop favors continued strength in the currency, particularly if external risk appetite remains elevated and the technical momentum continues to point lower for USD/ZAR.

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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