technical analysis GBPZAR

Technical analysis of GBPZAR

The pound has remained more-or-less steady against the rand this week ahead of the meeting of the South African Reserve Bank this afternoon GMT. Inflation in South Africa remains below the SARB’s target of 3-6% but demand for exports such as iron ore remains very high. This technical analysis of GBPZAR looks at the daily chart.

High resistance on this chart is the latest high around R21.50, while low support seems to be the latest low around R19.20. Before the latter, though, the psychological area of R20 is likely to be a key zone of support from which a bounce might be expected in the near future unless there’s a significant change in sentiment or the overall fundamental picture.

Technical indicators on GBPZAR D1

 

Moving averages are mixed. While the 50 SMA completed a golden cross of the 100 late last month, price is now in the value area between these and the 200 SMA remains significantly above, slightly below R21. A confirmed move below the 100 SMA, that is to say a daily close below it, might drive more losses towards the main low support around R19.20, while the 200 SMA could gap gains over the next few periods.

Relatively speaking for this symbol, Bollinger Bands (50, 0, 2) are fairly narrow and have been for most of 2021 so far, so many traders would expect a breakout one way or another over the next few weeks. There is no signal of saturation from either Bands or the slow stochastic (15, 5, 5), although the latter at about 24 is very close to oversold. As is typical for an emerging currency, volumes does not give a clear signal.

Price action and Fibonacci

 

This symbol’s generally high volatility makes patterns less reliable most of the time compared to majors, so the long-tailed three crows from 9 March should probably not be taken as a strong sell signal. The weakly defined triangle from 15 February might be a buy signal considering the fundamental context, but this is also not likely to be very reliable in itself.

While there have been several tests of the 61.8% weekly Fibonacci retracement area over the last fortnight, there has been no confirmed breakthrough yet, so the psychological zone around R20 seems to be a stronger support as a result. Equally, the 50% retracement has generally been an important resistance so far this year except in early March. Traders seeking to sell have technically suitable entries at the moment around the 61.8% area of the weekly Fibonacci fan, but as noted above relying heavily on TA for this symbol to the exclusion of fundamentals is a risky approach.

Technical analysis of GBPZAR: summary

 

Overall TA for pound-rand is neutral, with signals to sell and buy fairly closely matched. The SARB is unlikely to change its base rate of 3.5% this afternoon. Considering the long term, a resurgence of momentum for the main downtrend seems to be favourable, but the reaction to this afternoon’s news might well drive a deeper retracement upward.

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