And welcome to our last Weekly Rand Review of 2024!
The Rand had a nightmare week after several weeks of gains, what with interest rate cuts and political shake-ups around the globe, coupled with South Africa’s first FDI outflows in four years.
But it wasn't just the Rand that suffered, as global markets crashed mid-week before recovering somewhat.
Let's dive into some of the detail...
Market Pulse 📊
- Price Action: R17.82-18.43 range reflects increased volatility from last week
- Technical Setup: Support at R18.22 & R18.16, resistance at R18.43/
- Momentum: Risk sentiment shifted mid-week on hawkish Fed projections
- Risk Events: Fed rate cut and hawkish projections pivotal
- Outlook: Thinner forex trade leading into yearend could increase volatility
Key Moments (16-20 Dec 2024):
Some of the more critical factors affecting price action this week:
- Retail Sales & Fed Cause Jitters: Retails Sales as well as the Fed announcement caused triggers for the Dollar and the markets.
- BoE Holds Steady: The Bank of England kept its interest rate unchanged at 5.25%, citing persistent inflation risks .
- SA's First FDI Outflows Since 2020: Foreign direct investment reversed for the first time in 4 years
- Global Market Sell-off: Stock indices crashed on Wednesday before recovering on Friday, as did the crypto market
Calm Before the Storm… 🛬
Opening at R17.822/$, the Rand traded within a tight range for the day, lacking any major local or global drivers, as the market looked ahead to two interest rate cuts in the US and UK later in the week.
Initially testing higher to hit R17.93/$ in early afternoon, the Rand managed to make up some ground to close around R17.84 to the Dollar...
...but if anyone thought we were in for a more placid week, they were in for a nasty surprise, if our outlook from the prior Friday was anything to go by (see below)!
(click to enlarge)
Retail Shock Shakes the Rand 🛍️
Tuesday opened with the Rand below R17.85/$, but it didn't stay there for long as it edged up slowly in early trade...
...but then jumped on the release of US Retail Sales, which came in at a better-than-expected 0.7% month on month.
The US dollar barely reacted, but the Rand did!
In no time, we were over R18 and climbing, hitting a peak of R18.17 around SA close before managing to claw back some ground to end the day around R18.06/$...
...the pain had just begun!
Hawkish Fed Triggers a Market Bloodbath 📉
Wednesday was calm until it wasn't...
...as it languished in a R18.02-18.10 range for the whole of the South African session as the market awaited the Fed's rate decision and statement after hours.
While the market was expecting a 25 basis points cut, the Fed's hawkish statement took the market by surprise, indicating they would likely cut rates less than expected in 2025.
This time the Dollar did react—BIG TIME...
...rocketing to its best levels in over 2 years!
And the Rand had no chance, as it was catapulted higher, touching R18.36 before retreating slightly...
...but it wasn't just the Rand that took a pounding!
Global Equity Markets Tumbled!
This seemed to be a major trigger for a market sell-off as stock indexes crashed:
- S&P 500 fell 178 points or 3%
- Dow Jones dropped 1,123 points or 2.6%
- Nasdaq composite declined 3.6% after hitting an all-time high early in the week
- Russell 2000 fell 102.5 points or 4.4%
The Dow Jones is looking pretty sick after seeing record number of daily losses - last seen in 1974, which does not bode well...
And it wasn't only stocks, but Bitcoin and cryptocurrencies took a pounding, with 'crypto gold' BTC losing 15% of value before recovering at the end of the week...
..while actual real gold also fell to levels last seen in November
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💸 FDI Exodus Hits the Rand
The Rand opened the day at R18.30/$ and started off well, dropping to R18.22, but the nightmare was not over...
...as South Africa’s FDI outflows (R3.2 billion for Q3) spooked investors, pushing the Rand to a high of R18.43 before closing at R18.41, as capital flight concerns mounted.
And...(drum roll)...
...our outlandish forecast of just a few days prior was fulfilled.
Finally, Some Respite
And finally, as businesses started to look towards the new year, the Rand had a chance to recover slightly from a week to forget!
Opening at around R18.36/, it didn't look too promising to start off with, as it tested the prior day's highs before getting some fight back as it pushed lower to test below R18.30 by late morning and then managed to do even more after the close to end the day and the week around R18.28/$...
...and that was the wrap!
Volatility & Risk Analysis
A much more volatile week, with Wednesday providing the biggest move of 34c
- The Average Daily Range was 22.3c or 1.2% - which equates to a potential profit or loss of R12,000 every day for every R1 million exposure
- The Weekly Range (total fluctuation) from the lowest (R17.81/$) to the highest (R18.43/$) was 62c or 3.5%. This means by taking action at the right or wrong time you could have saved or lost R34,000 for every R1 million exposure...
How are you managing this risk??
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The Week Ahead
And so, as we head into the holiday period, we expect the Rand to be at its volatile best, despite there not being many triggers.
With not much on the go, we will plan to issue our next forecast on Friday, 3 January to give you what you need to start the year with a roadmap.
Until then, have a well-earned rest and get recharged for the new year - I have a feeling we are in for a humdinger of note!
To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive!
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
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This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
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If you have any questions or feedback, please leave them below.
To your success~
James Paynter
P.S. Worrying about how to in manage your Rand exposures this year? Email me or give me a call on (041) 373-6310 or (087) 551 2848 - we would love to help.
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