Two bullish candlestick patterns on the Pound to Rand exchange rate's charts support a bullish outlook for the pair.
GBP/ZAR is showing signs that the downtrend could be reversing and a more robust uptrend is taking its place.
The call comes as the pair trades at 16.69, just below where the pair had opened the week at 16.90.
Over the course of the previous week the exchange rate had managed to break above a key trendline that defined the 2016 move lower and although it has pulled back further upside is still probable, now the key break has been made.
In addition, two bullish Japanese candlestick patterns: a Bullish Engulfing followed by a Three Outside Up (indicated by the two blue dots marked P on the chart below) have occurred in quick succession at the turn and this is normally a very bullish sign.
As a result of this we see more upside as likely, therefore, with a break above the 17.1533 highs initiating a climb to the next target at 17.4400.
Lighting the Way..
Japanese candlesticks are a way of depicting price data in which the gap between the open and close is illustrated as a 'candle' and the extremities of high and low as 'wicks'.
When the open is above the close and the market has gone down during the day, the candle is filled in, when the close is above the open the candle is hollow.
Japanese candlestick charting originates from 17th century Japan, where it was used by rice trade.
When certain patterns emerge they forecast where the market is likely to go.
When two patterns occur in quick succession, as above, they reinforce each others' forecasting value.
The South African Rand is one of the outperformers at the start of the new week amidst a general lift in sentiment in global markets.
We have seen the ZAR tends to perform better when other high-yielding financial products - such as stocks - out-perform.
Traders were in a buoyant mood at the start of the new week as they rushed to price in an Hillary Clinton victory in Tuesday's election.
"If last week saw the likes of the indices and Dollar decimated as a result of another FBI email investigation, it comes as no surprise that today’s announcement has seen a substantial amount of last week’s losses reversed. The big question is whether this announcement will have a material effect upon the outcome of the US election, which is clearly perceived to be the case according to today’s market reaction," says Joshua Mahony at IG in London.
With hours to go before Americans vote, Democrat Hillary Clinton has about a 90% chance of defeating Republican Donald Trump in the race for the White House, according to the final Reuters/Ipsos States of the Nation project.
Her chances are roughly similar to last week's odds, and any upset by Trump on Tuesday depends on an unlikely combination of turnouts of white, black and Hispanic voters in six or seven states, according to the survey released on Monday.
Markets appear to have priced a Clinton victory so we see little further benefit to the NZ Dollar stemming from a Clinton win which leaves a potential big risk to the downside on a Trump win.