Key 17.99 Level Holds As Charts Hint Pound Rises Versus Rand
The Pound-to-Rand retains a bullish bid as markets fail to break lower.
The key 17.99 level in the Pound-to-Rand pair continues to hold unbroken.
The level has come under strain several times at the start of the week but each time has managed to hold - it once again came under pressure on Wednesday, October 4, after the pair was seen rising strongly from the level during trading in the afternoon.
The gains build on the "panicky Rand sell-off" of Tuesday - as it was described by Rand Merchant Bank, Strategist, John Cairns who went on to describe the mini crash as "without justification."
Yet the Rand is still selling off, with even more forece intraday on Wednesday.
The latest data from South Africa showed Total Vehicle Sales rising to above 50k for the first time since January.
The data showed that Total Vehicle Sales increased to 50320 in September from 49220 in August of 2017.
ABSA Manufacturing PMI for september, released on Monday, came out at 44.9, which was slightly higher than the previous month's 44.0, but no-where near the 46.0 forecast.
Other news from the country centres on a state visit from Zimbabwe's President Mugabe, who is attending a bi-national conference between the two countries, attending by South Africa's own President Jacob Zuma.
Chart's Showing Bullish Propensity
GBP/ZAR is noted to be in a strong short-term uptrend, which correlates with a subdued fundamental outlook for the Rand.
The pair has just broken out of a clear triangle formation on the weekly chart and has formed a continuation pattern (circled) which suggests even more upside for prices.
A breakout from a triangle is generally likely to extend to the same distance as the height of the pattern at its widest point (a) extrapolated higher (b) - or at a minimum extrapolated by 61.8% higher.
The occurrence of the 200-week moving average at the 18.6397 level is likely to act as an obstacle to further upside, and if the exchange meets it, it is likely to stall, pull-back or even reverse.
Thus we recommend the next upside target just below at 18.60.
The MACD momentum indicator is providing corroborating bullish backup after piercing above the zero-line, as does the ADX indicator, which shows how strongly trending prices are.
The ADX's current level at 19 is perfect for suggesting a continuation higher.
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