Dollar crashes...and Rand rides the wave

And just like that, before you could blink, we are already into December, and just a few weeks from shutdown.

Or is it lockdown?

We would hope not… but what a year it has been!

The ups, the downs, the pandemic, the crashing markets, then the soaring stocks, the Rand's recovery after it's pandemic crash...

...and so much more!

And now we sit with just a few weeks left before we close off 2021.

But what an important few weeks they will be, even as the Rand continues to trade sideways.

So let's get into the full review before we go any further, and then take a look at what the rest of the year holds.

Here were some of the biggest headlines from the 5 days:

• Vaccine Distribution - the UK is on track for rollout this week as an emergency, while the US and other countries are also doing their best to fastrack a solution for a fast rollout
• Stimulus Deal - over in the US, discussions are back on the table as lawmakers try get something passed before end of year congress shutdown
• Dollar Crash - the USD hit levels not seen since April 2018, moving toward testing 90 points on the Index...is this the end of the mighty reserve currency?
• SA's Second Wave - hotpots are going back into lockdown as SA and other government's try to control sweeping infections starting all over again

And so the Rand began another week around R15.23, after having tracked sideways once again. All eyes were on when we would see a breakout...

What is typical however, in smaller markets like the Rand, is that these moves are often dominated by the USD i.e. it is not so much Rand strength or Rand weakness, but that of the Dollar.

But it is not always like that. There are exceptions to every rule, as we have seen many times - the Rand is it's own animal.

However, this week - it was all about the American currency.

The USD which powered to massive highs in the midst of the pandemic fears in March, suddenly found itself on the ropes. The Dollar Index (DXY), the primary indicator of the current position of the reserve currency was down near 90 points, its lowest level since April 2018. This is in stark contrast to March, where it nearly hit 103 points.

So is this the demise of the reserve currency? Because that's the talk on the streets at the moment!

Well, based on our predictions for the DXY, we are certainly in for an interesting few months and years ahead. I don't think it is going to be the "end of the USD" like some dramatists like to predict...

...but some massive changes are coming that are going to throw many persons plans and investments off.

(If the Dollar's value is of any concern to you, please take a look at our Global Forecasts site here where we provide predictions on it's value)

So as this weakness played out through the week, the Rand was the beneficiary:

This was despite worries locally of the second wave. Nelson Mandela Bay was back into a semi-lockdown with control over hours you could be out, alcohol sales etc, as being identified as a hotspot.

How many other cities or provinces are to follow?

Very similar scenes were taking place over in the US too. Hotspots were re-occurring, and lockdowns were being re-implemented.

And then in other news across the globe:

• Discussions have turned from vaccine development to vaccine distribution across in the UK and US. All hopes of recovery of economies seems to hang on how quickly the distribution can take place. Over in the UK, Pfizer's vaccine was approved for rollout, starting from this week. With the vaccine being declared safe, and a more than 95% protection rate, the rollout would be huge - if it can be done efficiently. The UK has already ordered 40 million doses of this, and is hoping to be able to vaccinate 20 million people. The fact remains though, that this is going to be a logistical nightmare for every government, as they try to fast-track this.
• In the US, stimulus discussions restarted much to the cheer of markets. However, progress was slow going as another bill for 908 million USD was not supported by enough of congress. Talks continued between Treasury secretary Mnunchin, and Congress leaders Schumer, Pelosi and McConnell. Schumer warned of a "double-dip depression" with non-farm payrolls coming in at 245,000 instead of the expected 440,000. The recovery is certainly flagging, and trouble is afoot if there is not action fast from congress before the December shutdown…
• Also in the UK, we had Brexit talks continuing without much progress. Just when it looks like there is going to be a deal reached, something changes…feels like we have seen this all before. Time is now running short with the UK set to leave in just 3 weeks, and time for negotiations dwindling rapidly. It has become a make or break situation, and it looks like we are heading into another frantic end of year when it comes to Brexit - once again!
• And then, of course, there is the ongoing US election results drama that continues to unfold amidst lawsuits, legal challenges, recounts and testimony to legislatures in key swing states.

  Despite mainstream media's silence or claims to the contrary, mounting evidence and affidavits continue to pour in, highlighting manifold irregularities, statistical anomalies and illegal activities in these key states, as well as serious questions surrounding the functionality, security, vulnerability and foreign ownership of the voting system used in these key states.

  Frankly, one would expect this in a banana republic, not the US...

Some interesting weeks still lie ahead. As we have mentioned before, we quite expect this to go all the way to the US Supreme Court before the president-elect is confirmed.
As for the ZAR, it road the tumult of news globally very well, breaking down to near last month's levels, touching R15.12.

Eventual South African close was around R15.15, as the Rand enjoyed a slight gain overall from the week. However, with the greenback at its lowest level in 2 years, you would almost expect more from the ZAR.

The local unit continues to be driven by global news...and don't expect it to stop anytime soon.

As we head into the week ahead, the vaccine, Brexit, stimulus discussions and the remaining legal challenges in the US election will play a big role in what triggers market movement...

As we head into the new week, we are looking at a stack of events:

• SA - GDP, Current Account Q3, Inflation Rate
• USA - Fed monetary statement, Jobless Claims, Retail Sales, FOMC projections, Interest Rate Decision
• EU - Interest Rate Decision, Deposit Rate Decision, ECB Monetary Policy Statement

So plenty triggers here for market moves.

And that is apart from potential lockdowns globally ... and, of course, developments in the US as the election challenges and evidence continue to unfold.

Heading into the last few weeks of the year, the Rand is likely to be at its volatile best.

We will keep looking at our Elliott Wave based forecasting system to give us some clues, with two key levels that we will be watching to confirm our larger degree trends.
Please 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.

Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.

(You don't want to regret not having done so this time next week...)

Look forward to hearing from you.

To your success~

James Paynter