GBP/ZAR – Uptrend Still Intact Despite Sell-Off to 16.70s
The Pound to South African Rand has fallen to the 16.70s - below the target of 16.80 we stipulated in our midweek review.
It is still too early to argue that the short-term uptrend, which began after the news of Pravin Gordhan’s redundancy, is over.
The very short-term uptrend is still arguably intact and a break clearly above the 200-day moving average which caps the 17.36 April 11 highs, would still reinvigorate it, probably leading to a move up to the next major ceiling at 18.400 where the multi-month trendline is situated.
The 200-day, however, is a formidable boundary to cross and it will not be easy for bulls to push the exchange rate above it.
Important moving averages are levels of dynamic support and resistance, not just indicators of long-term equilibrium, and they can be very difficult to break through, therefore we would wish to see a move well above for confirmation, such as over 17.50.
If that threshold is crossed, however, we would expect a continuation up to a target just below the trendline at 18.40.
As far as data goes over the rest of the week, Friday is set to be a volatile day for the Pound side of the pair as Retail Sales data for March is released at 9.30 GMT.
A decline in of -0.2% is forecast but any deeper declines will weigh heavily on Sterling.
The main data release for South Africa is inflation data at 9.00 on Wednesday, April 19.
Current expectations are for a slowdown to 0.8% in March from 1.1% in February, but a deeper pull-back would be expected to hit ZAR.
