Early-warning signs the short-term trend may reverse.
- GBP/ZAR is giving signs and omens of a possible change in the near-term trend.
- These include a possible reversal pattern and the RSI moving out of oversold territory.
GBP/ZAR has formed a temporary bottom after a steep sell-off. The pair has been steadily rising back up during the last 4-hour period (see chart below) and has now almost completely regained the lost ground from the previous, red down candle.
GBP/ZAR 4-hour Chart
Assuming the current period closes at the same or a higher level as it is now, it will have formed a bullish reversal pattern called a Two-Bar reversal (green rectangle on chart).
Such a pattern suggests a possible reversal of the short-term trend. That said, it is still too early to be confident such a reversal will take place – it is merely a warning sign that the trend may be about to change.
Accompanying the formation of the pattern is the Relative Strength Index (RSI) momentum indicator moving out of oversold levels (blue-shaded circle). This is a buy signal and could be another warning sign the downtrend is reaching a conclusion.
