New Rand era to come?

South African Rand shows one of the best performance among emerging market currencies. USDZAR is testing lowest levels since March 2017 and weekly rates are below long term Simple Moving Average with period 233 weeks, first time in 5 ½ years. Will the pair continue posting fresh lows?

First of all, fundamentals, as usual. The Rand will continue appreciating as long as political expectations will keep the recent positive sentiment. The South African economy has been undervalued by international investors for years.

From technical point of view, the prices reached long term support on daily timeframe. It would be healthy to see a bounce after a first test of the lows from March 2017 (daily lows at 12.3126, and daily close at 12.4344). But the question is about the depth of such bounce. Conservative analysis tells me to pay attention to the blue median line on the daily chart below as an entry point for next shorts. As you may see, it worked well several times as a resistance line during 2017 first half downtrend and as a support line during the uptrend. Moreover, the latest gap of daily prices jumps exactly through this median line as resistance breakthrough.

 

However, would the market give us such a gift by returning to this line? When could it happen? We should take a closer look at H4 timeframe in order to answer these questions. 

Here are two simple moving averages with periods 34 and 55 (Fibo numbers). I like the green median line, as it goes exactly at the middle of the range between those two SMAs. RSI could come back to 50% level before the bearish continuation. So, approximate range of 12.6300/6500 should be deep enough to consider new short positions.