The Pound to Rand rate edged up on the day after the South African Reserve Bank cut its interest rates to 3.50%, marking a new record low. SARB Governor Lesetja Kganyago announced the 25 bps cut a few minutes ago, fulfilling the expectations of analysts as the South African economy combats a debilitating coronavirus epidemic within its shores that has left it with the highest case count in Africa.
The rainbow nation’s economy is struggling under one of its most severe economic crises, with virtually all economic indices under pressure as the country combats a recession. However, the Rand generally had a good month in June, as the government rolled out several stimulus measures and traders tried to take advantage of a carry trade situation that existed between the Pound to Rand as well as other Rand pairings with major currencies.
The GBPZAR is currently trading at 21.0579, slightly off its intraday highs at 21.1679.
Technical Outlook for GBPZAR
The Pound to Rand pair can be seen trading at the 50% retracement from the swing low of 30 December 2019 to the swing high of 6 April 2020. The premier Stochastics indicator is at oversold levels, and the DeMarker indicates a bullish divergence. The price picture is one that could favour recovery in the pair, which would target the 21.5981 price level (38.2% Fibonacci retracement) as the next upside target. Above this level, previous lows of 10 April, 30 April and 13 May converge around the 23.6% Fibonacci level at 22.3927 as another possible upside target.
On the flip side, strengthening of the ZAR from further carry trade activity could send the pair towards the 61.8% Fibonacci level at 20.3137 (previous lows of 25 February and 19 March), while the lows of 14 February to 26 February could present as a further target at 19.3994.