Rand Report- Technical trade view

The USD/ZAR currency pair broke below the R14.55/$ mark and traded directly to the R14/$ target suggested in our previous note (below). The long term trend for the pair remains up, with the short term move down serving as the first pullback from a near term price high. This pullback is highlighted with the parallel blue lines and resembles a bullish flag formation (in Technical Analysis terms). The bullish flag formation is suggestive of a weak move down after an aggressive move up, alluding to the underlying momentum as remaining positive. These patterns are considered bullish continuation patterns as they have a habit of occurring before the preceding uptrend is continued.

With this in mind, traders of the pattern might look for a close above the upper resistance line at around R14.30/$ for long entry. Should this breakout scenario occur, R15/$ would be the initial upside target favoured, a break of which would further consider R15.70/$ as the next upside target. A close below trend line support at R13.75/$ would consider the failure of the bullish indications.

Aggressive traders might look for long entry into the USD/ZAR currency pair at current levels (R14.15/$), instead of waiting for the breakout scenario, although waiting for the breakout remains our preferred confirmation for the trade.

The Rand – Technical View (Previous Note)

After last week’s bullish reversal (circled white), the SA40 Cash Index rallied to a high of 51348, roughly 100 points short of our upside target. Those that managed to catch the long position would have also benefitted from a dividend adjustment on the index of more than 200 points. Since then, we have seen a bearish reversal on the index price and it looks to be moving back towards initial support considered at 49700. The bearish move does not yet favour a short positioning on the index, as the proximity of the downside target relative to where we feel a stop loss should be, provides an unfavourable risk relative to reward scenario. At present we favour a market neutral positioning and wait for a bullish reversal signal for long entry. Should a new trade opportunity present itself, we will update the call in the MY IG section of the IG platform.