ZARGBP finds buyers at key support level
South African Rand/British Pound (ZARGBP) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 4th day in a row, ZARGBP ended the month -3.66% lower at 0.0448 after tanking 8 pips (-1.75%) today on high volume. Today's close at 0.0448 marks the lowest recorded closing price since May 19th. Closing below Thursday's low at 0.0452, the currency confirmed its breakout through the prior session low after trading up to 7 pips below it intraday.
Daily Candlestick Chart (ZARGBP as at Jul 31, 2020):
Friday's trading range has been 12 pips (2.64%), that's far above the last trading month's daily average range of 7 pips. Weekly volatility is also higher, being way above the market's average weekly trading range. The longer-term, monthly volatility is currently notably higher than usual for ZARGBP.
One bearish candlestick pattern matches today's price action, the Black Candle.
After trading down to 0.0445 earlier during the day, the pair bounced off the key technical support level at 0.0445 (S1). The failure to close below the support could increase that levels importance as support going forward. When prices bounced off a significant support level the last time on July 14th, ZARGBP gained 0.63% 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 might signal a potential change in momentum that could lead to a correction back up towards the center of the Bollinger Bands at 0.0470.
The trend is clearly bearish, showing an intact downtrend in the short, medium and long-term.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "4 Consecutive Lower Closes" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for ZAR/GBP. Out of 49 times, ZARGBP closed higher 48.98% 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 two trading days, showing a win rate of 57.14% with an average market move of -0.02%.