The last time we wrote about USDZAR was in the spring of 2021. The pair was trading around 14.30, down almost 26% from its 2020 top of 19.35. Trends, however, don’t last forever, especially in the Forex market. So instead of joining the bears in anticipation of more weakness, we took a different approach.
After examining the Elliott Wave structure of that decline, we concluded USDZAR can surge by at least 15%. This conclusion was based entirely on the chart below, published on April 27th, 2021.
The decline from 19.35 looked like a textbook five-wave impulse. We labeled the pattern (1)-(2)-(3)-(4)-(5), where the five sub-waves of waves (1) and (3) was also visible. The fifth and final wave was still in progress. According to the theory, a three-wave recovery in wave B was supposed to begin as soon as wave (5) ended.
The area between 16.00 and 16.50 looked like a reasonable bullish target. Once there, a bearish reversal for the start of wave C down should be expected. Ten months later now, the updated chart below shows how things went.
Wave A bottomed out at 13.40 in early-June. Wave B started with a swift reversal, which eventually led the pair up to 16.37 in late-November. It is interesting to notice that wave B corrected exactly half of wave A. The following slide to 14.98 last week must be part of wave C.
C-waves usually exceed the end of the corresponding A-wave. In USDZAR ‘s case, this makes the levels below 13.40 a plausible target going forward. As long as the pair trades under 16.37, the bears remain in charge.
Similar Elliott Wave setups occur in the stock, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!
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