Is the USDZAR becoming a more stable market...?

All of us began the week with some trepidation as to what was coming next.

Despite some rocky ground, it had been a great couple of weeks for the ZAR.

But very seldom has the Rand treated us to a continued period of stability. So we are always just left waiting for it to end.

However...it seemed this week was not the one.

The market is stringing together some good moves, and suddenly we are sitting at a comfortable R13.01/$ to close the week out...

Some were saying that the USDZAR is changing as a market...

...but we are going to take more convincing than a few weeks of smooth sailing.

The question for the wise is more - "When will it end?"

Our forecasts are giving a good bit of insight to this - click here to get access to them for free...

...and then read on to see how this last week played out!

The previous week closed off with our forecast, and with the Rand having already made significant gains on Friday, taking it to R13.1528.

Our forecast showed that we expected it to go into the 13.15-13.00 area before it would then bottom out. A break above R13.3094 would then be required in order for a change in trend to be confirmed...

Click to enlarge

The week was packed with events, with the main focus being Central bankers' Jackson Hole event in Wyoming, meaning plenty of speeches and announcements expected to be made.

For Monday though, things kept calm (perhaps because, across the pond, most were taken up with the first full solar eclipse visible across the breadth of the US since 1918)...

...albeit a little choppy, the Rand managed to stabilize in the latter half of the day, and ended around R13.16/$.

Quietly, we moved to Tuesday.

And this was to be expected to continue until later in the week, as the Jackson Hole event starting on Thursday was the highlight for investors & traders to look toward.

However, some preliminary movement came through on Tuesday, as the Rand pushed higher to touch as high as R13.23...

Still, there was a good portion of calmness to the market, and by the following morning, we were sitting in the low R13.20s...

Before we had even realized, two days had slipped by and we were on to Wednesday.

SA Inflation figures were out at 10am, but apart from that, everyone was waiting for Thursday's events.

Expectations are that last month’s inflation will continue lowering the trend, tempting the SA Reserve Bank (SARB) to cut interest rates in September or November (the inflation figure was expected to sway the SARB’s decision).

As for the the day's movements, it start with the Rand pushing as high as R13 .27/$ during the course of the morning (failing to break above the critical 13.3094 level), before the tide turned.

On the back of a reportedly 'angry' Trump campaign rally in Arizona on Tuesday evening, where he blasted 'Fake News' and other issues, the Dollar took a beating. In the course of the afternoon, the Rand gained ground fast, and went as far as to touch R13.13!

Snippets of News

Pieter Hugo of Prudential Unit Trusts advises that we " Don’t let the rand dictate offshore investment decisions" in his article on Fin24...

Quoting his article - "In the past 18 months or so, we’ve seen a rush by many investors to take funds offshore, precipitated by the sharp depreciation of the rand following the “Nenegate” debacle in December 2015, and continuing in the wake of “Gordhangate” in March this year and the consequent sovereign credit rating downgrades.

Because the rand is a highly emotive factor, dominating the news headlines, investors’ immediate focus is often solely on the level of the rand, and not whether an offshore investment actually makes sense from a valuation perspective."

He makes very valid points...

BUT we HAVE to make the Rand influence our offshore investment decisions! The value of the Rand dictates the profitability of your investment. The key to it though, is knowing where the market is heading...and when to take action!

Throughout the morning, the market pushed upward to move above R13.20/$...

...however, once again, the Rand clawed its way back to sub R13.20 levels!

It has been a continued period of stable strength from the Rand, and it is giving a bit of a boost to the wounded economy to at least have some stability of a period of time.

Key speeches were coming at the Jackson Hole event on Friday, from Fed Yellen and Draghi, and it was possible that there could be some more market movement on the last day of the week.

For the past 4 days, the Rand had just been hitting snooze, not wanting to take action on anything around it.

And then Friday...

...was today going to be the day it all happened?

The Rand answered with another day of calm...

...and then ended it with late burst of strength!

Yellen, speaking in Jackson Hole, Wyoming, on Friday said the financial system is safer now than it was then though some adjustments to regulations may be needed.

There was no mention about monetary policy guidance going forward, said TreasuryOne in a snap note to clients.

This supposedly sent the USD onto the backfoot, and in no time, it had touched below R13/$!

Another strong week for the ZAR closes...it just seemed to be stringing them together, in a continued good period..

By the time the weekend arrived, the Rand had sailed to a comfortable R13.01/$, and was looking resilient as ever, as the week ended...

As the Rand continues to defy expectations of normal volatility, the weeks have quickly been slipping by, without us hardly realizing.

The last 28 days have been to the large extent calm, with the total monthly range being less than 50c - a quite admirable feat for the Rand.

But it cannot go on forever.

And with next week bringing the new month, there are a slew of economic events.

We are going to need to keep an eye on this, as well as the effects of the Jackson Hole event still to be seen.

It promises to be another interesting week. Don't look away - the next episode of the USDZAR is upcoming.

Get your VIP box to watch the happenings here (a position where you can be in comfort, understanding what is happening from a distance, with a far greater perspective.)

Best regards,

James