Pound to South African Rand: 20.00 is Now Resistance Level

The British Pound to South African Rand exchange rate (GBP-ZAR) has failed to advance beyond the record 20.00 level delivered in the past 24 hours.

This confirms our suspicions that this zone will form a formidable barrier to advances.

If 20.00 does ultimately break in the future then another sharp rally could ensue.

At the time of writing the pound to South African rand exchange rate (GBPZAR) is at 19.7631 following the Bank of England event on Thursday. We warned that the market was going into the event with an over-optimistic stance on GBP.

This may be short-lived set-back for sterling as momentum favours the UK currency - GBP/ZAR has been trending higher since May having finally broken out of that 17-18.50 range that entrapped the pair over 2014.

The present rally certainly has legs with the currency pairing trading above the 20, 50 and 100 day moving averages.

Be aware though that the RSI is trading at 74 on the weekly charts and is therefore in overbought territory.

This does not necessarily mean a retraction will take place, rather it suggests that there is scope for a pullback on any disappointing news.

We believe that GBP/ZAR 20.00 will prove a formidable barrier of resistance to cross with many in the market opting to use this level to take profit on the recent rally. As we can see from below this is precisely what has occured: 

Support for any losses will be seen at the 20 day moving average (the green line) which is presently noted at 19.8466.

ZAR payments? Your bank will inflict a discretionary spread when delivering currency. To get as close to the market rate as possible an independent specialist is required, this can see up to 5% more currency being deliverd.

Commodity Currencies: Tough Times for the Family

The Rand, Australian, Canadian, and New Zealand dollars have all experienced a significant selloff  throughout the year and subsequently retreated to levels not seen since the onset of the global  financial crisis.

In particular, Australia is dealing with a sustained fall of iron ore prices and an economy highly focused upon the mining industry. In comparison, New Zealand and Canada are also experiencing a significant downturn in their major export industries, dairy and oil.

For South Africa which is a major gold, platinum and coal exporter we can understand why sentiment will in ZAR will track that in CAD, NZD and AUD.

Indeed - until this family start finding their feet again we would suggest the trend lower will continue.

Oil prices are showing little sign of upside traction while long term forecasting of commodity prices is also adding to the case for further depreciation of the Canadian and Australian Dollar.

In particular, long-run Iron Ore predictions show the commodity still facing additional price declines, in a move that will strongly impact the Australian economy.

“The reality is that Canada, Australia, and New Zealand have hitched their respective economies to a burgeoning and expanding China. Their respective GDP diversities are limited and they therefore face the very real prospect of contraction within their economies in the medium term,” says Steven Knight, Market Strategist for Blackwell Global.