Technical analysis of EUR-ZAR
The rand’s large losses against the euro have been ongoing for most of this week despite a brief recovery around the release of the Budget on Wednesday. Click on the image to enlarge. This morning’s rate above R17.31 was the highest for more than six months. Exness Education’s technical summary of EUR–ZAR considers some of the areas that might be important for this symbol next week.
Technical indicators on EUR-ZAR H4
Moving averages in their usual combination of 50, 100 and 200 give a strong buy signal. Each is successively above the other, and the 50 SMA from Bands also completed a golden cross of the 100 SMA early on Wednesday morning. The most important support from MAs in the near future is likely to be the 50 SMA.
EUR–ZAR is definitely strongly overbought on this timeframe. 11 successive periods closed outside the upper deviation of Bollinger Bands (50, 0, 2) and it seems possible that the current period will also close outside Bands. The slow stochastic (15, 5, 5) meanwhile is in the process of forming a downward crossover within overbought. MACD prints a buy signal.
Price action and Fibonacci
Recent price action suggests a degree of indecision among buyers now that the euro is so clearly overbought here. The previous period is a gravestone near-doji, which would suggest that further major realised gains are unlikely over the next few periods at least. The current period could close with a hanging man, which would confirm the sell signal from price action. However, such confirmation would only come after the close of the current period.
The 61.8% Fibonacci retracement area coincides with the likely low support on this timeframe at around R16.57. This will probably be a strong area in the event of a deep retracement from which one would expect to see a bounce. Before this, though, the 23.6% Fibo might be important as a support; this zone also nearly coincides with the key psychological area of R17.00.
Technical analysis of EUR-ZAR: summary
The overall picture from technicals seems to favour a degree of retracement next week. The extent of this would likely be determined by how price behaves after it emerges from overbought, which would be possible on Monday. Conversely, EUR–ZAR is notorious for its very high volatility. Any trader getting involved after such a sharp movement would need to be even more careful than usual before and during sell orders from here.
Fundamentals for the rand are also likely to be crucial next week, most importantly Tuesday’s GDP data. For more information, have a look at our fundamental analysis of the rand from earlier today, and stay tuned for Monday’s weekly data preview.