technical analysis GBPZAR

Technical analysis of GBPZAR

The pound’s losses against the rand have continued this week as expectations of failure in ongoing British-EU trade talks remain high. The rumour of the moment in markets is that the UK is even preparing to walk away from the talks and accept no trade deal. On the other hand, South Africa’s GDP dropped 51% in Q2 2020 as announced on Tuesday, the biggest quarterly drop in at least 30 years, so the rand has faced some headwinds this week. Today’s technical analysis of GBPZAR looks at the four-hour chart (H4).

The main high resistance here is the latest high around R 23. A more immediate area though could be R 22. Support meanwhile could be the latest brief low around R 21.35, touched last night GMT.

Technical indicators on GBPZAR H4


Moving averages have recently flipped to showing a sell signal, with all three of the 50, 100 and 200 SMAs now successively below slower lines and above price. The death cross of the 50 and 100 SMAs can be observed at the very end of last week while Tuesday night saw another death cross, this time of the 100 and 200 SMAs.

The main resistance from moving averages in the short term is the 50 SMA from Bands around the psychological area of R 22. Above this, the value area between the 100 and 200 SMAs could also be important in halting any potential bounce at least temporarily.

Price has recently moved out of oversold based on both Bollinger Bands (50, 0, 2) and the slow stochastic (15, 5, 5). The latter at about 30 remains fairly close to the zone of selling saturation but does not give a clear warning against new sells from here. Volume has been fairly constant throughout September so far.

Price action and Fibonacci


The large tail of last night’s candle as price recovered above R 21.50 seems to indicate this area’s importance as a support. R 21.50 had been an important resistance in March and then again in June. However, the current period’s fairly long wick taken in context seems to indicate indecision, so traders entering here in either direction should probably prepare for volatility tomorrow and perhaps into next week as well.

Now that price seems to have broken clearly through the 50% daily Fibonacci retracement area, we might expect this zone to turn into a resistance and cap any bounces in the short term. On the other hand, the latest low coincides with the equivalent 61.8% area, so in the absence of important new fundamental drivers a pause with relative calm between these two areas seems to be possible over the next few days.

Technical analysis of GBPZAR: summary


Overall the technical picture for pound-rand suggests more losses to come over the next few periods, just probably not of the same extent seen yesterday morning GMT. Conversely, most pairs with the rand are notorious for extremely high volatility, so traders should monitor any positions for GBPZAR closely and avoid unrealistic targets.

The next key data to affect this symbol is tomorrow morning’s balance of trade from the UK at 6.00 GMT. This combined with the range of British industrial and manufacturing data could cause considerable instability for pound-rand tomorrow morning, so it might be an idea to wait for the dust to settle before ordering GBPZAR.

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