USD/ZAR extends rally to 7-month high but looking overbought.
USD/ZAR hit a near 7-month high of 13.9095 today as the pair stretches an uptrend that began in late February. Momentum indicators are all in positive territory, pointing to a continuation of the strong bullish bias in the near term. However, the RSI has crossed into overbought levels, suggesting a downside correction could be due soon.
If prices continue to trend higher, the next resistance will likely be met at just below the 14 handle around 13.95, while further up, the 14.15 area could act as an obstacle. A successful challenge of these barriers would open the way towards the 423.6% Fibonacci projection of the down-leg from 12.7296 to 12.1756. The 423.6% Fibonacci level is not too far from November 2017’s one-year peak of 14.5671.
In the event of a downside correction though, immediate support is likely to come at the 261.8% Fibonacci projection of 13.6260. Further declines would pull prices towards the 13.40 support level followed by the 161.8% Fibonacci at 13.0720. A breach of this support would open the way towards the 100% Fibonacci (swing high) at 12.7296. This is also where the 200-day moving average is flatlining. A drop below it would shift the short-term bias to bearish.
In the more medium-term picture, the outlook is increasingly positive, with a bullish crossover of the 50- and 200-day moving averages looking imminent.
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