USD/ZAR: Deeper decline on a break below 200-DMA at 18.60 – SocGen

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Economists at Société Générale analyze USD/ZAR technical outlook after the pair formed a Head and Shoulders pattern last month.

Right shoulder near 19.25 is an important hurdle near term

USD/ZAR formed a lower high near 19.64 last month and evolved within a Head and Shoulders. It subsequently confirmed this formation and drifted towards interim low near 18.20. A sharp rebound has led it back above the 200-DMA (18.60). It is worth noting that the pair had brief breaks below this MA on couple of occasions this year and the uptrend continued after reclaiming it.

In case the pair establishes below the MA at 18.60, a deeper down move can’t be ruled out towards 18.20 and target of the pattern near 17.80.

The right shoulder near 19.25 is an important hurdle near term.