Phew, what a week in the markets - and in the world!
The Rand is now on the ropes following a staggering decline over the last few weeks, now sitting well above R15 to the Dollar.
And this just a few weeks after no one could understand the ZAR's strength...
...and now suddenly that is nowhere to be seen.
And then there was the Afghanistan chaos, with Biden's grip on US citizens safety seemingly slipping by the hour as the week went on.
This is the first major test of his presidency - and so far a very unsteady hand has been seen, with citizens stranded in amidst the Taliban takeover.
Let's get into the full week's review...and show you how you could have seen it all coming, despite the unpredictable news...!
Before the week began, and as turmoil was already rising in the Middle East, we issued our forecast on Friday the 13th, giving the outlook for the week ahead. With the Rand at R14.70, the expected trend was for the Rand to bottom out very soon, with a move upwards expected. A break of the R14.87 level would confirm that we would head higher towards R15/$ and above.
(see below - click to enlarge)
It was going to be an interesting week...
...and interesting it was. Here was the biggest headlines:
- Rand Train-Wreck - in just 2 months, the ZAR has really lost its way as we now sit around R2 weaker than it was just back in June...
- Eastern Mess - Biden's toughest week in office without a doubt, as a lot of criticism of his weak decision-making came from all quarters...
- Economic Figures - all eyes continued to watch any signs for clear recovery or results of the spread of the Delta variant & new lockdowns...
So, to start at the beginning, we had the Rand at R14.67, as we came really close to breaking into our initial target area.
But that was the best price the ZAR would be at for the whole week, as we didn't see it below R14.75 again after Monday...
The market's position now is such a far cry from where it was 2 months ago - with the Dollar Index now pushing upwards of 93 points.
This unwinding of Rand strength has been a long time coming, and our Elliott Wave based forecasting system called it back in May with one of our longer term outlooks expecting a bottoming out in the R13.90-13.18 area, before moving upwards to target R15.50-17.00...
(see below - click to enlarge)
...3 months later, we see just that!
And this is really the 'magic' of an objective system. No one could have predicted back in May that SA would have the riots and that the Delta variant would be bringing more government lockdowns across the globe.
But the thing to see is this - you don't need to predict the news.
You just need to understand the patterns of repeatable waves of human emotion.
And that is what the Elliott Wave Principle is based on - and why we trust it for all our predictions, in combination with more than 20 years of experience in the markets.
To get back to the week though, things unravelled fast from Monday, as we broke R15/$ on Wednesday, as the surge just seemed unstoppable.
On Wednesday, we issued our next update with the expected trends for the next few days.
(see below - click to enlarge)
It showed the Rand at R14.93, and the bias still being for it to move higher into the R15.06-15.30 area over the coming days.
And that is just what happened, as the Rand even extended beyond our target area by the time Friday rolled around, we were hitting just off the R15.40 level before the day was out…
...whew, what a week!
And then in other news:
- While the Rand's volatility was continuing, most of the world's attention was elsewhere as the Middle East descended into chaos with a complete Taliban takeover of Afghanistan. Biden bumbled from one decision to the next, as US troops being withdrawn from the country turned out to be a terrible decision for any form of stability in the country. Evacuations through the week were near impossible as citizens wanted to flee the country, hanging onto US planes in an attempt to get aboard and leave. As of Friday, the situation remained very tense and very uncertain, as Americans and other citizens had no clear paths out of the country...
- In economic news, Chinese industrial production missed expectations by a mile, which does not bode well for the local unit (China being SA's biggest trading partner) and shows that global economic recovery is still on the back foot. In local news, retail sales data for June came in slightly better than expected while the inflation rate remained stable at 4.6% year on year.
- The FED released their FOMC minutes, indicating a possible decrease in support for the economy by reducing the pace of asset purchases by year-end. Keywords like “potential upside risks to inflation and elevated valuations” were used which caused investors to run for cover in the face of uncertainty… The Federal Reserve reiterated that interest rate hikes are unlikely while the central bank’s balance sheet is growing.
- As we approach another holiday season, shipping will again be a focus in an industry which has still not recovered from last year's holiday season chaos. Expect things to get much worse as more reckless lockdowns are already slowing the battered shipping market, and with suppliers already trying to prepare for end of year, expect there to be a lot of of shortages of different items once again, as supply chains are once again under the pump.
Eventually the Rand ended the week just back under the R15.30 mark.
It had been a rollercoaster of note, and the ZAR was really on the ropes heading into the next week...
...what next?
The Week Ahead (23-27 August 2021) |
As we look to the week ahead, we have have fairly small events in terms of fundamentals, but expect plenty of news none the less as the Middle East's situation plays out...
Here is what little we are watching next week:
- SA - Unemployment Rate
- US - Durable Goods Orders, Jobless Claims, GDP, Trade Balance, Fed Speech
The rand has been on the back foot the past couple of weeks and there is the chance of more weakness, but as usual, it is unlikely to be one-way traffic. We will continue to filter out the noise and simply follow what the charts themselves are telling us with our Elliott Wave based forecasting system.
We suggest you do the same!
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.
Look forward to hearing from you.
To your success~
James Paynter
