Here’s how much the rand is expected to fall after a major two week run

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The rand fell, after clocking up its longest weekly winning run since 2010, as analysts at Rabobank and JPMorgan Chase & Co said the currency has rallied too far.

The rand weakened as much as 1.3% against the dollar, set for the biggest loss since 7 December.

The selloff on Monday sent the 14-day relative strength index of dollar-rand pairing, which lingered in oversold territory for most of the past three weeks, above 30. The cost of insuring the nation’s debt against default rose the most in almost a month from the lowest level since May 2013, according to CMA prices.

Euphoria following Cyril Ramaphosa’s election as leader of the ruling African National Congress on 18 December helped boost the rand 11% last month, the most among the world’s major currencies.

The win has put the billionaire businessman, who has pledged to revive the struggling economy and stamp out corruption, on a course to take over from Jacob Zuma as the country’s president. The ANC’s top leadership will discuss a proposal to order Zuma to step down at a meeting on Wednesday, according to three members of the panel who spoke on condition of anonymity.

But Ramaphosa’s victory has been priced in already, said Piotr Matys, an emerging markets foreign exchange strategist at Rabobank.

“While Ramaphosa’s long-term economic plan would likely put South Africa on the path of sustainable and balanced growth, implementing it could prove far more difficult than initially assumed by investors,” he said.

Rand Bears

There has always been skepticism over the currency’s rally after Ramaphosa’s win. Bearishness on the currency, as measured by options contracts to sell the rand over those to buy the currency in the next three months, known as the 25 Delta risk reversal, remained the highest in emerging markets at about 3 percentage points since mid-December.

“In our short-term model based on credit default swaps and U.S. rates, the rand is about 6% too rich,” JPMorgan analysts Anezka Christovova, Carlos Carranza and Jonathan Cavenagh said in a note to clients.

The currency fell 0.9% to R12.42 per dollar as of 3:11 p.m. in Johannesburg. A drop of 6% would therefore put the rand closer to the R13 mark.

The rand has come up against a resistance that’s preventing it from gaining further, according to a technical study.

The Fibonacci Retracement chart shows the currency is close to retracing 50% of the slump between 2011 and 2016. If it clears the line, the rand may climb to as high as R10.89 per dollar. But if the resistance proves too strong for the currency, it may fall back to R13.57.