Technical Tuesday

USD/ZAR

The USD/ZAR produced the bearish reversal scenario off the 18.00 resistance level before returning to support at the 17.65 level.

The price has confirmed a break below this level with 17.55 now in close proximity.

A busy week in terms of central bank activity cautions trades on currency markets.

However from a purely technical perspective, traders might look to see a close below 17.55, before targeting a move to support at 17.40. In this scenario a close above 17.65 might be used as a stop loss consideration.

For long entry instead, traders might prefer to see a close back above the 17.65 resistance level. In this scenario, 18.00 once again becomes the resistance target from the move, while a close below the 17.55 might be used as a stop loss indication.

Spot Gold

Gold produced the upside breakout scenario presented in our previous note and has since traded to the resistance target at 2585.

The move higher has put the price back into overbought territory. Traders who were into the move might consider exiting there trades at current levels waiting for a new long entry opportunity.

Ideally new long positions would be considered on a pullback towards support between the 2530 and 2485 levels.

Should this opportunity or another present itself we will update guidance accordingly with targets and failure levels.

Brent Crude Oil

The price of brent crude has rebounded off the 69.70 support level and produced an upside break of the 72.20 level. The upside break suggests 75.00 to be the next resistance target from the move. Traders who are long might consider using a close below the 71.15 level as a stop loss indication for the trade.

Gold Fields vs Newgold Issuer

The pair considers a Long Gold Fields position against a Short Newgold position. The net result of these combined trades looks for a 15% profit margin. A stop loss is considered of equal proportion to the expected gain.

A successful pair trade can be realized 1 of 3 ways:
1. The long position rises while the short position falls
2. The long position rises faster than the short position rises
3. The short position falls faster than the long position falls.

The blue line on the chart represents the Gold Fields / Newgold ratio which recently traded more than 2 standard deviations below the mean (middle line). A successful trade would require the ratio (blue line) to return to the mean to meet the guided profit target.