ZARGBP finds buyers at key support level
South African Rand/British Pound (ZARGBP) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving higher for the 3rd day in a row, ZARGBP ended the week 5.18% higher at 0.0467 after gaining 2 pips (0.43%) today. Today's close at 0.0467 marks the highest recorded closing price since March 26th. Trading up to 6 pips lower after the open, the pair managed to reverse during the session as bulls took control ending the day above its opening price. Ending the day with an indecisive close, neither buyers nor sellers were able to gain control during the session.
Daily Candlestick Chart (ZARGBP as at May 22, 2020):
Friday's trading range has been 8 pips (1.72%), that's slightly above the last trading month's daily average range of 8 pips. Weekly volatility is also higher, being above the market's average weekly trading range. The longer-term, monthly volatility is currently significantly higher than usual for ZARGBP.
Two candlestick patterns are matching today's price action, the Bullish Closing Marubozu and the Tweezer Top which are both known as bullish patterns. The last time a Tweezer Top showed up on May 7th, ZARGBP gained 1.15% on the following trading day.
After trading down to 0.0459 earlier during the day, the market bounced off the key technical support level at 0.0461 (S1). The failure to close below the support could increase that levels importance as support going forward. After having been unable to move above 0.0467 in the previous session, the forex pair ran into sellers again around the same price level today, missing to move higher than 0.0467.
With another close above the upper Bollinger Band, prices are confirming their strong upward momentum in the short-term. A drop back into the Bollinger Band on the next trading day although might signal a potential change in momentum that could lead to a correction back down towards the center of the Bollinger Bands at 0.0441.
Though the FX pair is experiencing a short-term uptrend, this might just be a correction, as both the medium and long-term trends are still bearish.
Among the 10 market conditions that our pattern recognition engine identified today, the statistics for the Technical Indicators based market condition "Close above the upper Bollinger Band" stand out. While it is usually interpreted as bullish, it has actually shown to be bearish for ZAR/GBP. Out of 126 times, ZARGBP closed lower 51.59% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after 10 trading days, showing a win rate of 52.38% with an average market move of -0.10%.