Support for SA's rand at 8.45

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IOL world currency1 Graphic: Renjith Krishnan.

The rand has recovered against the dollar from its recent five-month lows and technicals suggest the short-to-medium term trend is for the currency to strengthen.

Following is a selection of comments from analysts on important technical developments for the rand.

KAMRAN SHEIKH, TECHNICAL ANALYST, IGM

“The most important level on the downside is 8.2080 because it was last Tuesday's low and the market has been holding above that. If this level goes, it means the market can go to 8.05 or 8.00.

“On the upside we have quite strong resistances at the moment. The initial level is the high we saw last week at 8.4625. This level is in close proximity to last December's high and above there we have 8.61, which was the 2011 peak and a 38.2 percent retracement of the 2008-2011 decline.

“These are the short-to-medium term levels which require attention. Since early March we've been on an upward trend and so far we don't see any acute signs of reversal. For the last two weeks the market has only been consolidating.”

JUDY PADAYACHEE, TECHNICAL STRATEGIST, ABSA CAPITAL

“I'm looking for dollar/rand to be rangebound at 8.20 to 8.45 over the next two to three days. Fears have subsided a bit so we could see a little bit of risk-on later in the week and we could still see 8.15 before the rand weakens again.

“We're seeing a lot of rand demand around the 8.45-8.50 area so that's a big resistance level and I think we're going to see the rand recover a little bit. But back above 8.50 would indicate that it could go back as far as 8.80.

“But I think 8.45-50 will basically be protected because we saw that a couple of times last week and the week before.”

TRADITION ANALYTICS

“The prospect of a euro rally should not be underestimated. For risk assets in general, which would include emerging market currencies such as the rand, this would hint at the possibility of a rand recovery.

“More recently, technical analysis has hinted at a loss in upside momentum and the prospect of a correction, and the risk of that has now increased.

“In the short-to-medium term, anticipating significant further rand weakness on the back of developments in the euro zone may be asking for too much.

“Last week we highlighted the repeated failure to sustain levels above 8.40 and this remains the case. Looking at selling dollars towards 8.40 if such levels arise is still favoured, with a break below 8.30 highlighting the potential for a deeper retreat to test levels closer to 8.17.”

JOHANNEBURG RAND TRADER

“We went up quite aggressively from the 7.70 area, so we're overbought at the moment and we're trying to dip, but we need to get through at least 8.23, otherwise there's a danger we just go back to recent highs, maybe even up towards 8.60.

“The lower 8.20s is quite pivotal now. If we get below there, we will have seen our recent high, but if we can't get back below 8.20 I think we'll go higher again.” - Reuters


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