Against all odds...the ZAR wins again...as predicted

A calm surface...but turmoil underneath.

The gains of the Rand over the last week are a welcome relief to many who had seen their wealth getting sliced into smaller and smaller pieces as if it were a pork sausage.

So a welcome relief. But not a problem solver.

Despite the Rand's gains, it does not give the market, or South Africa for that matter, any stability that is so needed.

However, with the political landscape in South Africa, is this perhaps just too much to ask?

Who knows...

...but the Rand's strengthening this past week was putting a mask over what happened just 2 weeks ago, with Gordhan's firing, #JunkStatus and another one of the signs that Zuma is getting ready to use his power exactly how he wants to.

Dangerous times.

But despite that, the market made some excellent progress - in direct contradiction to what was happening around it too!

And more importantly, directly in line with our forecasts too...

Read on to see how it happened...

After a very successful previous week, the market opened at R13.40/$. This was already a far cry from the previous week, where the market touched R13.95 in a rollicking stretch of volatility.

Sentiment was already changing.

Headlines suggesting that Gorhdan's firing and cabinet reshuffle had not even hurt South Africa...just another sign of the excellent masking job the Rand was doing.

Finally now it seemed that some calm had arrived, despite the turmoil beneath the surface.

First things first...

Our forecast update was due on Monday morning, and despite it being a public holiday, it seemed our subscribers needed the updates - so we obliged.
(which is understandable, considering the confusion that is surrounding the markets right now 🙂

The short term outlook showed the USD/ZAR at R13.4010 to the Dollar, and further strength coming soon (see below) with the next few days were expected to see the Rand strengthen to 13.22-12.90...

Few would have believed this would actually be our forecast after where we had been just 7 days before that!

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And the Rand's happy run continued...

Despite minimal trade or economic events, the Rand cut through some more important levels.

As tensions continued to bubble over between the USA, Russia and North Korea with the threat of imminent war, the Rand took advantage of the situation and cruised as far as R13.27/$ just on Monday!

A full 65c in the positive from where all hope was supposedly lost...!

And onwards to Tuesday we went.

Tuesday was one of those days where it may as well have not happened at all!

(I think most in SA also wished it was not happening at all as the long weekend came to an end 🙂

It was a day of two halves, as the market started the first half of the day rushing off in the opposite direction to the last week of movement.

As always, some shockwaves went through the markets...and then it turned back again. Tuesday afternoon was almost a mirror image of the morning!

This meant the market ended more or less where it had opened in the morning - ending a rather inconclusive day!

A study done by Fin24 from the previous week showed an a interesting picture of how things have changed in South Africa's government bonds since the the start of March.

So...did the recall have any effect?

In our opinion: Yes, without a shadow of a doubt!

It is very well hidden, but the bad effects of the reshuffle are there. Don't be fooled!

UK Prime Minister Theresa May calling for an election on Tuesday had been a bit of a shock to most...and it had left the Rand spiraling against the pound, as it lost further ground into the R17/£ areas.

Further US data now has chances of a June Fed hike at 44%...there was definitely something coming in the markets with all these different sauces and spices being put into the bubbling pot...

As for the USDZAR, it opened at R13.24 in the early hours of Wednesday, but proceeded to repeat the previous day's antics as it weakened viciously again throughout the morning!

Perhaps these were signs of chinks in the armour?

The market took a stab higher all the way to R13.37 to the Dollar before once again, turning in the afternoon...(what was it with all these moodswings??)

However, just a 12c range for the entire day which must be something of a record for the Rand in recent times!

The market closed after strengthening gently, just a touch under R13.30/$.

And then Thursday - we issued our forecast for the day which showed a very similar picture to what we saw on Monday.

The market was due to strengthen into the 13.22-12.90 area before it would then bottom out... Whether it would be a temporary correction or a change of trend would have to be studied the next week.

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And with aplomb, the Rand marched onward!

In no time it was below the critical 13.22 mark and had moved perfectly in line with our forecast. It had strengthened into the target area, and things where looking rosy.

However... It poses some questions.

The rand strengthened on the back of news that investors have invested nearly R2bn back into South Africa...

And so this short period of good progress for the Rand continued.

Which poses the questions:

• Had persons already taken into account that this would all happen?
• Were investors going to pile money into the country regardless of the political landscape and risk, in order to get a higher yield?

I think we will find that the answer to this is yes. And that is why so often, a huge build up to an event ends in anti-climax, or sometimes a complete 180 degree turn on what we expect.

Moving onwards...

The rand had pulled out some great moves for the week, but it seemed after Thursday that it had had enough for one week.

Despite the terriorist attack in Paris, a calm seemed to descend upon the markets.

Slowly but surely, they dragged their way through the remainder of Thursday and Friday.

With little to no time economic events or market moving politics, the rand sealed off an overall very clinical week by cruising to a close around R13.10/$ on Friday afternoon, just waiting for our forecast from Thursday to be validated.

This next week is sure to be a humdinger.

The market sits perched at a strong level in the low R13s and there are a long list of economic events due during the course of this week.

With tensions just bubbling between the USA, Russia and North Korea, there is just that feeling of emotional build up in the people.

This combined with economic events, can provide some massive moves.

But that is not to say it will happen...

...despite there being the French Election, Fed announcements, ECB Interest Rate Decision and more, it is unlikely to be a calm week!

But, as we have stressed many times, events are great for a trigger. But awful for telling market direction.

Want to understand this better? And find what ACTUALLY move the markets?

Well, I have some good news.

Click the link below to opt-in for our new free email series - Rand Secrets.

I think it will really open up the world of forex markets to you if you haven't read it already.

I think it could answer a lot of your questions.

I woud love to hear some feedback.

Best regards,
James