The rand (ZAR) has started to weaken again against the dollar (USD), and last week it broke above a four-month dollar resistance level. This points to further weakening for the rand, as shown on its chart.
Dollar/rand: New break-out.
Recommendation: Sell short the rand.
Trend: Short term sideways. Medium term technical rand strength, but weakening.
(Daily)
- On Friday the rand broke out decisively above line 3 resistance (of a channel with line 2). This was a significant event and points to more rand weakening to come.
- The short-term stochastic oscillator is becoming overbought for the dollar, but the weekly chart (not shown) is oversold, confirming more rand weakness to come.
- Sell short the rand against the dollar. (It was at R10.58 at the time of writing).
- The minimum target is R10.75 in the short term, with R10.90 being easily reachable thereafter. Moreover, this may start a new ongoing trend of rand weakness, which I believe is the more likely scenario.
- The stop-loss is a close below R10.34 for new rand shorts. There is dollar support at line 4 (R10.25).
* Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author or to attend his courses, go to www.themarket.co.za.