From positive to pear-shaped - what next for ZAR?

A week which started so well...

...and then back to usual business once again.

How many more times are we going to have this

It was a week of events - French Election, Zimbabwe's decision not to use the Rand as their currency, Trump's tax plan and more.

But with the market sitting pretty at 12.87 on Monday morning, the tables seemed to turn.

And it was one way traffic after that. All heading Northwards.

What had happened?

What had changed?

What caused the Rand to turn then?

Who knows - but lets take a look to see how we could have taken action based on what information we had...

On Thursday last week, we had issued an update (see below - click to enlarge) for the next few days of market activity, showing that the market should be strengthening into the 13.22-12.90 area before bottoming out.

Click to enlarge

This forecast was not validated immediately, and therefore was still valid when Monday morning arrived. So we had information from Thursday the week before that the Rand was going to bottom out...lots of time to take action.

And then we were due for an update to the forecast on Monday morning - the outlook had not changed, but the target area had narrowed to 13.05-12.82, and the market was expected to bottom out now.

Click to enlarge

Monday was all about Viva la France as Centralist candidate Emmanuel Macron took the first round of results the day before - he is seen as good news for the markets, due to his support for European integration and a single currency.

Other big highlights for the week was the prospect of Trump's tax plan, and also Freedom Day on Thursday.

But back to the Rand...

...despite it being a sleepy Monday, it had plans.

From its close on Friday at 13.06/$, the market opened almost 10c lower than this - a shock to many, as suddenly the Rand was trading below R13!

And it became clear that Monday was going to be a choppy one...

...from its low of 12.89 in early hours of Monday

...to its high of 13.02 by mid morning

...to its low for the day of 12.87 by midday

...to its worst rate for the day of R13.07/$ by the close of business!

Without some kind of roadmap as to what is coming around the corner, this kind of market movement can destroy a business...

...with our forecasts telling them what was coming, our subscribers knew they could stick to their guns.

The day rounded off with the Rand closing around R13/$...time for us to catch our breath!

Market Vacuum

An interesting picture greeted us on Monday as we saw how the market had dropped all of 10c without actually moving...

This was described by our analyst as being this:

"Market often gaps in the third wave of an impulse. But nature hates a vacuum and so more often than not the market is drawn back to fill this price gap."

Tuesday...

And the tide was turning fast.

Headlines of "How long can the Rand's run last?" began surfacing, and it was a sign that the see-saw was beginning to topple to the other side.

It is the way it works...

Tuesday brought further weakness to the Rand, but movement was fairly gentle for the most part of the day, as the Rand closed around R13.05/$.

Now Wednesday - often the moving day of the week (although you never really know with the Rand)

The long awaited tax plan from Trump was due today and this was a big highlight on the agenda right from his election. Now to see if he could get it right, unlike the TrumpCare disaster!

Right from the word go, the market was on the move.

From 8:00, the Rand began a steady climb toward the resistance we identified in our forecast around 13.25.

And onwards it went!

By the close of business for the day, the Rand had already broken through the crucial level of R13.25 and was not showing any sign of stopping just yet.

All of this still being in anticipation - Trump had still not released his tax plan yet.

When the news did finally hit in the evening on Wednesday, the Rand actually reacted exactly the opposite to all expectations and began to strengthen!

Shock and horror, but that is how the markets work.

Rand weakness was also put down to rumours that South Africa is leaving the JP Morgan Bond Index...

By the time the market opened on Thursday morning, Freedom day in South Africa, from the high of R13.36 from the day before, the Rand had strengthened all the way down to R13.18!

As it was a public holiday, we did not release our forecast for the day as most of South Africa took a break from their daily duties.

As for the Rand...well, it always has other ideas.

From its low at 8am on Thursday, it turned everything around once again, shooting to its worst level for the week of R13.38!

Our forecast from Monday had been perfectly validated, once again proving how crucial it is to follow the information given to us by a trustable system such as Elliottwave.

Friday...

And due to the public holiday, this was now our forecast day.
The outlook was updated to show the market sitting at R13.33 to the Dollar. The expected trend was for some retracement in Rand strengthening, before the market would then head further upwards.

Click to enlarge

And as per our forecast, the market began the day with the retracement. It was strengthening well, and soon was sitting below R13.25 to the Dollar, just as expected.

US and UK GDP figures and SA's trade balance were all due during the course of the day, so some further movement in line with our forecast was to be expected.

And wow, was there still some movement!

In late afternoon the Rand reacted viciously, shooting over R13.39/$ for seemingly no reason at all!

There was still some further retracement after business hours, but the Rand ended up settling around R13.35/$ after a rollicking week...

What does the week ahead hold?

With political instability in both America and South Africa, the markets are bound to have something in store for us. Politics tends to guide a lot of the sentiment around markets, although not giving us any help with actual market direction.

So what can we do about this?

This past week we published our webinar on "What is The Future of The Rand?" which was presented by myself and Scott Picken.

It is a real eye opener, and I would advise watching it if you are looking to get some idea of market direction for the coming few years.

I go over a lot of the same principles in that webinar in an email sequence we call "Rand Secrets". If you are interested in rather receiving a lot of the information from the webinar in bite size emails, then click here to opt-in for the sequence

All the best for this week, let us know what questions you have.

Kind regards,
James