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South African Rand Tipped to Keep any Sterling Gains in Check

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- GBP/ZAR failed to break above the 200-week MA which was capping gains in the 17.00s

- It has since fallen back down in the 16.00s

- Overall it appears to be stuck in a sideways range which is forecast to continue

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© thanasak, Adobe Stock

The Pound-to-Rand exchange rate has pulled back down into the 16.00s again, having been as high as 17.29 earlier this month and at the time of writing one Pound buys 16.92 Rand on the interbank market.

Last week we talked about the possibility that the pair might break above the 200-day moving average (MA) at 17.25 after touching the level for the fourth time (circled below). On all the previous occasions it was unsuccessful but we speculated this time might be different suggesting that a final break would open up substantial buying interest that could really push the exchange rate into fresh territory.

However, as is often the case at levels of such substantial resistance, the break failed and the pair fell back down to current levels.

Short-term technical studies of the four hour chart confirm a rough sequence of descending peaks and troughs which indicate the trend is down in the very short-term:

However, further studies of the same chart show momentum on the last trough was weak and then the most recent price bar (circled) is a strong, green, bullish up-bar, suggesting the possibility of a recovery.

In line with this observation it is gratifying to see our studies being validated by a 1% jump in the exchange rate on Tuesday, May 29.

The daily chart - which gives us a multi-day perspective - appears to suggest sideways action is likely to be a feature of coming days.

The longer-term weekly chart below, suggests the overall trend is down ever since the peak at 25.78 reached in 2016 and therefore at some point in the future those with an interest in GBP/ZAR should be wary of the potential for a more sustained break lower:

Taken all together the charts recommend the persistence of a sideways range more than the probability of a breakout and directional move for the coming week.

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