Rand, World’s Best Currency, May Gain 4%: Technical Analysis

By Garth Theunissen

May 25 (Bloomberg) -- South Africa’s rand, the world’s best-performing major currency this year, may rally another 4 percent if it breaks through 8.23 per dollar and stays there, based on technical analysis by Barclays Plc-owned Absa Capital.

Candlestick charting shows the rand closed stronger than its opening levels everyday last week, suggesting it’s “fighting” to appreciate further, said Judy Padayachee, a technical analyst at Johannesburg-based Absa. Even so, it has yet to remain stronger than the so-called “resistance” level of 8.23 per dollar, according to Padayachee.

The rand traded 0.7 percent weaker today at 8.3375 per dollar as of 7:15 a.m. Johannesburg, from a close of 8.2801 on May 22 when it traded as strong as 8.2070. The currency’s 5.2 percent rally last week was its best five-day winning streak since the period ended April 3.

“The rand is struggling to sustain levels below 8.23,” Padayachee said on May 22. “We’ve seen a lot of dollar buying whenever it gets near the 8.23 mark, which suggests that’s where a lot of options” to sell rand and buy dollars kick in, she added.

A battle is being fought between “rand bears” and “rand bulls,” Padayachee said. The currency closed 1.1 percent weaker than its best levels reached against the dollar on May 20, showing rand bears won the session, she said. On May 21 the currency closed within 0.2 percent of its best level, a day for the bulls, Padayachee said. The currency ended 0.9 percent weaker than it highest level on May 22.

If the rand can maintain gains at levels stronger than 8.23 per dollar, it may rally to 8, the currency’s “next major pivot level,” Padayachee said.

The rand has appreciated 15 percent against the dollar this year on speculation the worst of the global economic crisis since World War II may be over. The currency slumped 28 percent in 2008 as the collapse of Lehman Brothers Holdings Inc. led to the seizure of credit markets and financial firms worldwide posted more than $1 trillion in writedowns and debt-related losses since the beginning of 2007.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net