Jan. 17 (Bloomberg) -- The rand may strengthen to 8.67 per dollar “in the near term” before resuming declines, Absa Capital said, citing trading patterns.
South Africa’s currency posted a so-called shooting star pattern yesterday, a sign that it is set for a rebound, Judy Padayachee, a technical analyst at Johannesburg-based Absa, wrote in an e-mailed note to clients today. A shooting star pattern occurs when a security’s opening, low and closing price are similar.
“We believe that the correction we have been looking for has a strong case,” Padayachee wrote. The currency is likely to resume its decline, trading between 9 and 9:20 per dollar in the second half, she added.
The rand was trading 0.2 percent stronger at 8.7862 a dollar by 10:09 a.m. in Johannesburg. It’s weakened 3.5 percent this year, the worst performance out of 25 emerging-market currencies monitored by Bloomberg, after Fitch Ratings cut the nation’s credit ratings and amid labor unrest in the mining and agricultural industries. Should the currency close below 8.78 per dollar, that would strengthen the case for a short-term rebound, Padayachee wrote.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
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