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Pound-Rand Outlook: Still Poised to Break Lower

Rand outlook

Image © Pound Sterling Live

- GBP/ZAR finds support at trendline but vulnerable

- Could break lower if outlook turns bearish

The Pound-to-Rand exchange rate is trading at around 17.69 on Tuesday, after a 0.2% decline already so far this week, and studies of the charts suggest the pair could go lower subject to a break below the July 4 lows.

The pair is still trading at around the level of a major trendline which is providing underpinning support as evidenced in the 4-hr chart below which is used to analyse the short-term trend, which means the next 5 days or week of trading activity:

Four hour chart GBP/ZAR

A break below the 17.56 July 4 lows, however, would provide confirmation of a break and a continuation lower, to an initial target at 17.5000.

The daily chart shows a similar picture - the pair is in a downtrend which has reached support at a major trendline. A break below the July 4 lows, however, would provide the green light for a continuation of the bear trend down to the next target at 17.30.

Daily GBPZAR

The RSI momentum indicator in the bottom panel has moved out of the oversold zone suggesting the pair is no-longer at an extreme and at risk of a rebound. Overall it is neither particularly bearish or bullish.

We use the daily chart above to analyse the medium-term trend which includes the next 1-4 weeks of price action.

The weekly chart meanwhile shows the pair rising in a channel over the long-term. The aforementioned trendline which is currently providing support is actually the lower borderline of that channel.

Weekly GBPZAR

A breakout from the channel would be a bearish sign for the pair and probably indicate a decline down to the May 2018 lows at 16.55.

The RSI momentum indicator in the lower pane has fallen in line with price which is a bearish sign.

The weekly chart is used to analyze the long-term forecasting horizon, defined as between 1-4 months into the future.

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