Pound vs South African Rand: Tech Forecast For Next Five Days
The Pound to Rand exchange rate (GBP/ZAR) has been falling for most of August but our studies suggest the August downtrend is looking tired now and we see an increasing chance that the decline might fade and reverse.
The rounding nature of the most recent activity in the downtrend is redolent of a 'rounding bottom' formation which is a type of reversal pattern seen at chart lows.
This as well as a formidable zone of support levels acting as obstacles are two reasons we are now much less bearish for the pair.
On the daily chart we see a good chance there will be a bounce off the support zone composed of the long-term trendline and the support line from at the key July 21 lows.
It is too early to be sure this will happen but if the exchange rate were to break above the 17.0000 level it help confirm a bullish reversal was taking place to a target at 17.0800, initially, where the 50-day moving average is situated.
The MACD is also narrowing and looks like it is about to bend round and move higher.
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Fundamentals to Watch
As far as news, data, and fundamentals go, the most important release for the Rand is likely to be GDP figures for the second quarter on Tuesday, at 10.30 BST.
The market expects a 2.2% rebound in growth in Q2, up from -0.7% in Q1, on a quarter-on-quarter basis.
Year-on-year Q2 in 2017 is forecast to rise by 0.4% from 1.0% in Q1 2016.
Wednesday sees the release of local mining and manufacturing production data for July.
Given the current resurgence in the gold market due to increasing geopolitical fears, the rising price of gold may begin to be a factor supporting the Rand as the yellow metal is one of South Africa's main exports.
On Thursday, politics takes centre stage again as the Constitutional Court will hear the EFF’s application to compel the National Assembly to institute an investigation into President Zuma having violated the constitution.
The Pound: Watch the Politics
The main factors in the coming week for the Pound may be political, as the outlook for data remains rather mild, with the main release Services PMI on Tuesday morning.
On Thursday, parliament will debate the government's Brexit bill.
There is a risk the government may not be able to vote the bill through in its current form, as many opposition MP's as well as pro-Europe MPs in their own party, want to make substantial changes to 'soften' the bill.
Recent news has focused on how a growing clique of dissenters from within the Tory party want to make sure trade links with Europe are maintained after a Brexit, and how the government is supposedly trying to use 'strong-arm' tactics to persuade them to fall into line.
This has led to rumours of dissenters planning a plot to oust Theresa May.
Busy Week for Data
There is also data on tap to consider.
Construction PMI released on Monday disappointed against expectations with a reading of 51.1 suggesting the sector is is just about growing.
However it is the Services PMI data out on Tuesday that will matter for Sterling as the services sector accounts for upwards of 80% of the UK economy; economists are forecasting a reading of 53.5, down from the 53.8 recorded in July.
Thursday, September 7 witnesses the release of Halifax House prices in August at 8.30 BST.
Friday, September 8, sees the release of Industrial and Manufacturing Production for July, at 9.30 BST.
The former is supposed to show a 0.2% rise and the latter a 0.3% rise.
The Trade Balance in July is out at the same time, and is expected to show a narrowing of the deficit to -11.9bn from -12.72bn previously.
