The South African rand was one of the best-performing currencies this year as it jumped by over 11% against the US dollar. The USD/ZAR exchange rate was trading at 16.68, down by 16.4% from its highest point this year. It has also formed a risky technical pattern pointing to more rand gains.
USD/ZAR technical analysis suggests more downside
The weekly chart shows that the USD to ZAR exchange rate has been in a strong bearish trend in the past few months. It has formed a double-top pattern at 19.91 and a neckline at 17.02, its lowest level in September last year.
The pair is also about to form a death cross pattern, which happens when the 50-week and 200-week Exponential Moving Averages (EMA) cross each other. The spread between the two indicators has continued to narrow in the past few weeks.
Historically, a death cross and a double-top pattern points to more downside over time. It has also moved below the Supertrend indicator, one of the riskiest formations.
The pair has moved to the 50% Fibonacci Retracement level. Therefore, the most likely scenario is where the USD/ZAR forecast continues falling as sellers target the next key support at 15.85, the 61.8% Fibonacci Retracement level.
Why the South African rand surged in 2025
There are a few reasons why the USD/ZAR pair has crashed in the past few months. First, the decline is mostly because of the ongoing US Dollar Index (DXY), which has dropped from the year-to-date high of $110 to $100 today. A closer look shows that the currency has dropped against other currencies again, like sterling and the euro.
Second, the South African rand jumped because of the ongoing commodity prices in the past few months. Gold, a top South African export, surged to a record high, and analysts at Goldman Sachs, believe that it has more upside this year. South Africa is expected to produce about 100 tons of gold this year, with exports expected to be worth over $8.5 billion.
Third, the currency surged because of the relatively stable economy despite the conflict with Donald Trump. The most recent data showed that the headline Consumer Price Index (CPI) stood at 3.5% in November, inside the Reserve Bank of South Africa (SARB) range of between 3% and 6%. SARB recently adjusted the inflation target to 3%, which led to more demand for South African assets, with foreign investors buying bonds with over $7.6 billion.
These numbers helped the South African Reserve Bank (SARB) to deliver four interest rate cuts worth about 100 basis points, and analysts expect the data to show that the bank will cut more in January 2026.
Meanwhile, Eskom, the giant utility company, managed to keep lights on for the most part of the year, ending the rotational blackouts known as load shedding. Other major companies in the rail and port sector also did well during the year.
And most recently, the government hinted that if will not extend more bailouts to these companies, a move that led to a higher credit rating.
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