Market News & Analysis


Top Story

USD/ZAR Forming Cup and Handle but Must Fill the Gap First!

The South African Rand gapped lower on Sunday evening as Moody’s maintained its investment grade rating for South Africa.  Many were expecting the credit agency to downgrade the rating, as the budget forecast for South Africa showed that the financials of the county were deteriorating.  However, although Moody’s did maintain the investment grade rating, they did cut the outlook from stable to negative.   

On a daily timeframe, it looks as if USD/ZAR could be forming a cup-and-handle formation dating back to August of 2018.  After the pair broke higher in February of 2018, it spiked higher to a high of 15.3861. The pair pulled back to near the 61.8% retracement level of that same timeframe to 13.3243 and began a rounding bottom formation (the cup) back towards the highs.  USD/ZAR retraced back to near the prior highs to 15.4939 and appears to be currently putting in the “handle” portion of the cup-and-handle formation.  The target for the cup-and-handle formation is the distance from top of the cup to the bottom, added to the breakout point from the handle.  In this case the target for USD/ZAR is near 17.4000.

Source: Tradingview, City Index

On a 240-minute chart, we get clearer picture of the “handle”.  USD/ZAR began pulling back and trading in a downward sloping channel.  Before the initial pullback off the high, the pair put in a double top and reached the target near 14.5000 in mid-September.  Price has been range trading within the channel between 14.5000 and 15.4000 since then.  However, on Sunday, price gapped lower from 14.9858 down to 14.8886.  Currently, price appears to be trying to trade into the gap.   

Source: Tradingview, City Index

First resistance comes in at the gap fill of 14.9856.  Above there, resistance is at the top of the downward sloping trendline near 15.2500.  Next resistance is at the “handle” highs near 15.4939.  First support is yesterday’s lows at 14.6761.  Below that is horizontal support from the lows on both September 13 and October 28th at 14.5108. 

Keep an eye on the gap!  That is the first step in fulfilling the cup-and-handle formation!


From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.