Commentary The dollar remains in a downtrend against most other currencies and this is keeping us dollar bears. There has, however, been an upward breakout by the US dollar index (76.0) which broke above seven-month old bear trend resistance in late October. The index has not made a higher high but we suggest keeping a close watch on price activity next week - we'd view a higher high as a precursor to dollar strength. Our chart below shows that the dollar broke above resistance relative to the rand in late October. A double bottom has formed at R7.20 which was our long-time target and the only major technical level before R6.50. Our view is that the dollar has ended its downtrend relative to the rand and is now likely to trade between support at R7.20 and the new resistance level we've drawn at R7.90 (and falling). We are thus near-term neutral. Medium-term, we believe a break above R7.90 is needed to confirm a full reversal and give a new buy signal on the dollar relative to the rand. In our opinion, this would be a necessary precursor to outperformance by JSE gold shares and most other rand hedge shares.
