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- USD/ZAR trades -0.73% lower this morning, seeing some relief after 5 successively firmer sessions.
- The cross closed +0.17% firmer, but saw a bearish inverted hammer candle formed with the price action as sellers stepped in around the 61.8% Fibonacci level at 14.88.
- Price action is now approaching the 50 & 200dmas below around 14.50-14.60 which represent the next dynamic supports.
- Focus today will be on pre-FOMC positioning with markets concerned about a relatively hawkish outcome in the 2024 distribution in the dot plot.
- Although the SARB decision is expected to be uneventful, focus will shift to discussion of the revised 3-4% inflation target proposal and the bank's assessment of rebased GDP.
- Sell-side seem to diverge over the path of inflation into yea end with international analysts calling for a +25bp hike by year-end, while local analysts see little scope for tightening out as far as end-2022.
- We stand closer to the latter with our base case being unchanged to 1Q22, with the possibility of extension should inflation remain broadly contained in the Oct-Nov period – in line with the forecast.
- Local economists remain relatively optimistic that the current ZAR weakness will be near-term in nature – owing to solid fundamentals.
- Intraday Sup1: 14.6577, Sup2: 14.5753, Res1: 14.7586, Res2: 14.8632