In true fashion, just when all hope is lost, the market takes a corner.
And the Rand showed it still had some fight in it, as it picked itself off the canvas and fought back strongly.
But have the tables turned, or is it too early to call
There is still little to cheer about on the political & economic side of things as discussed by Andrew Rissik of Sable Forex on our webinar on Tuesday (click this link to watch a snippet where he speaks on current issues in SA - very informative)
Andrew has a very widespread and 'on-the-ground' knowledge of what is going on, and his outlook gives a very full picture.
Please watch that, and then come back to read the rest of this review - it is worth your time.
For any more information on the webinar or Andrew himself, please let me know by replying to this email.
Now to move on with the review...
How It Happened (9-13 Oct 2017) |
Friday's forecast showed that we were due for a slight recovery of the Rand from the levels which it had hit around R13.80, but that it was going to be short-lived, before it would then head higher to test the 13.88 level...
Click to enlargeAnd this was how the next 3 days unfolded...
Key takeaways from the last week -
- Zuma to face charges - the 783 charges against Zuma have come back to haunt him, but will it make any difference?
- The Rand - comeback time for the mighty TZAR with a fantastic 59c recovery...
- Durban Storm wreaks havoc - while South Africa is always in need of rain, too much can be destructive, as we saw with #DurbanStorm which ripped the guts out of the coastal city...
- US Unemployment - 16 year low is hit, but Non-Farm Payrolls fall short of expectations
- US Stock Market - it increased by 5.2 Trillion Dollars since the election of Donald Trump - a 22% increase in less than 1 year.
- Bitcoin hits $5000 - cryptocurrencies continue to create waves in the financial world...they are clearly the future!
This was a key week. The Rand had been on a hiding to nothing for the past month and a half, and it was high time for turnaround.
The EURZAR had hit its worst level in 2017. And there were rumours of North Korea preparing a nuclear test. But apart from that, it was a quiet day as it was a US Bank holiday - Columbus Day.
According to Nick Downing of Overberg Asset Management - "The dollar has strengthened against all currencies since US President Donald Trump came out with his tax reform proposals, causing emerging market (EM) currencies to weaken against it," Downing told Fin24. Whatever the apparent reasons, the market had been moving in line with forecasts.
Despite the quiet day, the market kept pushing upwards on Monday, touching as high as 13.86- just short of the target area shown on Friday!
This was a 6 month low for the battered market - no small feat!
It was expected that the markets would play a waiting game on Tuesday in view of Friday US retail sales & inflation figures - but that often does not happen quite how we would like it to. South African mining and manufacturing data were to be released too - which plays a significant role in the SA GDP, and the ratings agencies view on the country.
Released on Tuesday evening was the Fed Minutes, however, the chance of a rate hike in December was 92%, so many thought we may not see too much reaction from the Rand...
...however, with this news, and in anticipation of all the events, the market made excellent ground, and closed on Tuesday with a low of R13.62 to the greenback - an over 15c gain since the start of the day.
The biggest news from Tuesday was actually the #DurbanStorm which created absolute havoc in KZN, with fierce winds, torrential rain, massive hail stones and flooding bringing the area to its knees...!
One thing was for sure, and that was that the Rand was on the run against the Dollar - on Wednesday it made great gains, going as far as to touch R13.51/$!
Internationally, the IMF released its global growth figures for 2017 and 2018. While most of the world, developed and developing, is expected to grow, South Africa continues to lag with growth hovering around, and likely below, 1% for the next 18 months.
Analysts at Rand Merchant Bank and ING Groep predict the Rand will rebound against the dollar by year-end as the pull of improving fundamentals and the hunt for yield support buyers amid political risks.
"We would expect the rand to appreciate in a normal environment," said Halen Bothma, a market analyst at ETM. "If you erase the risks like the ANC conference and the medium-term budget policy statement, the fundamentals are supportive. We are modestly bullish on the rand."
Anyway, that is what the economists say... 🙂
As for us, we rather stick to a more reliable system - the Elliott Wave Principle, which helped us create the forecast below for the coming days. It showed the Rand was expected to weaken further, with a possible test of trendline support before rising:
Click to enlargeWith just two days left in the week, it was crucial for the Rand to close out well.
A good start on Thursday was trading below R13.50/$ when the markets opened - upcoming events for the balance of the week were going to be the key...
- SA Mining Production Data
- US Retail Sales
- US Inflation figures
- Fed & ECB member's speeches
A concern of Andrew Rissik's from our webinar on Wednesday was that SARS was not going to be able to make up their massive loss they just incurred in the last quarter...well, on Thursday, the news hit that SARS had collected a 'bonus' more than R1bn from undeclared offshore assets - read here
And in other news, the Guptas were being probed...again
And the Rand seemed to be the beneficiary of every bit of news as it pushed progressively lower:
Thursday saw the market even touching below R13.40 (apparently on the back of mining production data - in August, miners posted a growth of 6.6% y/y. This is GDP positive, but possibly overshadowed by the Mining Charter that is still in the wings...)
Then, on Friday the Rand get a boost as news hit that Zuma was going to have to face those 783 charges which just keep on lingering around - the Supreme Court had overruled, and it was time for Zuma to face the music again...
...and together with US Retail & Inflation figures, the markets took this as all Rand-positive with the Rand managing to push lower and finally close out around R13.27/$...
...a truly remarkable week for the local currency!
The Week Ahead (16-20 Oct 2017) |
Monday has opened with the Rand still on the front foot.
There aren't a lot of fundamentals news triggers this week, but that does not mean we should expect a quiet week (wouldn't it be nice to have one?!)
At this stage, the Rand strength is looking somewhat overdone and a short term reversal can be expected soon, but there are some key levels we are watching to see how the next few days' movements affects the bigger picture.
Want to get a bird's eye view of where sentiment is expected to take the Rand?
Join us on the inside track today using the link below:
Look forward to helping you succeed~
Kind regards
James Paynter
