GBPZAR unable to break through key resistance level
British Pound/South African Rand (GBPZAR) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving lower for the 3rd day in a row, GBPZAR finished the week -4.77% lower at 21.4296 after losing 868 pips (-0.4%) today. Today's close at 21.4296 marks the lowest recorded closing price since March 26th. Trading 2646 pips higher after the open, the FX pair was unable to hold its gains as the bears took control ending the day below its opening price. Closing below Thursday's low at 21.4343, the pair confirmed its breakout through the prior session low after trading up to 237 pips below it intraday.
Daily Candlestick Chart (GBPZAR as at May 22, 2020):
Friday's trading range has been 3656 pips (1.7%), that's slightly below the last trading month's daily average range of 4096 pips. Things look different on the weekly timeframe, where the market's trading range of the last week has been slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently notably higher than usual for GBPZAR.
One bullish candlestick pattern matches today's price action, the Inverted Hammer.
Unable to break through the key technical resistance level at 21.6730 (R1), the currency closed below it after spiking up to 21.7762 earlier during the day. The failure to close above the resistance might increase that levels significance going forward. After having been unable to move lower than 21.4343 in the previous session, the forex pair found buyers again around the same price level today at 21.4106. The last time this happened on Tuesday, GBPZAR actually lost -2.40% on the following trading day.
With another close below the lower Bollinger Band, prices are confirming their strong downward momentum in the short-term. A rally back into the Bollinger Band on the next trading day although could signal a potential change in momentum that might lead to a correction back up towards the center of the Bollinger Bands at 22.6922.
While the market is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
Among the 10 market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Inverted Hammer" stand out. Its common bullish interpretation has been confirmed for GBP/ZAR. Out of 12 times, GBPZAR closed higher 66.67% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 83.33% with an average market move of 2.06%.
With four out of the seven Major FX Pairs closing lower today, the ones that stand out on the negative side are GBPUSD losing -0.47% and EURUSD closing -0.44% lower. On the flipside the best performers have been USDCAD closing 0.33% higher and USDCHF gaining 0.08%. Looking at the other Minor FX Pairs and Crosses, the winners of the day have been USDCZK surging 1.09% and USDHUF closing 0.9% higher. The worst performers of the day have been USDMXN tanking -0.58% and SGDHKD closing -0.51% lower. Read more