Rand Review - 13 Feb 2017

The State of the Nation.

Or should we say, Chaos of the State of the nation?

What else could be the talking point of this week?

As the Rand ducked and dived throughout the week, it was clear that everything was building up to this event at the latter end of the week.

However... the speech itself did not bring a lot of action to the markets at all, as the Rand in fact stabilized when Zuma (finally) got to speak…

This shows once again that news and political events are NOT the most important things in terms of determining market direction…

...if only it were that simple!

Let us review what happened, how it happened, and how we are looking for the coming week...

As we started the week, all on the horizon was relatively quiet on the data front, with Donald Trump & SONA the two well known wild cards to watch.

It was only to be expected that one, or both, were going to be causing quite a stir at some stage during the week, and that the markets would react to it as well.

So, on Monday morning, our forecast was released with the market trading at R13.2875…

...after a fantastic strengthening toward the end of the previous week, the Rand sat quite pretty, and persons were eager to see what the week ahead held.

Our outlook (see below - click to enlarge) was sent out, showing that things hang in the balance for the next few days. There was a 50% chance that we would see the Rand bottoming out in the next few days, but this was the preferred count as it was stated as Count #1.

Click to enlarge

Monday turned out to just be another one of those days…

The markets hammered upward in the early afternoon, with some of those vicious, stabbing candlesticks, punching it ever higher, soon leaving it over R13.40...

...before it all came tumbling back down to R14.25 late on Monday night.

It feels as if this has become the norm in the markets. And reminds us of the need to follow the Elliottwave Principle to get clarity, and how this is becoming so important in getting a perspective.

Around midnight on Monday, the markets turned once again weakening back above 13.40....

By Tuesday 11am, the Rand had lost over 20c, in just a few hours.

Now Tuesday was a quiet day on the data side of things, so why did this happen?

The fact is this: we can look at events like SONA, we could look at economic events, and we can look at all the other noise surrounding forex markets.

However, at the end of it all, you cannot judge market direction on any one of these pieces of distraction.

And this is why many are still surprised, when the market ‘apparently’ moves for no reason.

Moving on to the rest of Tuesday, the markets began to stabilize a little.

After a while, they seemed to have settled for the time being.

Suddenly, two days were gone in the week, and we were less than 48 hours from the notorious SONA…

During the early hours of Wednesday morning, the Rand lost more ground as it went to its worst level of the week, right into the R13.50s…

It was expected that the markets were going to be rather jittery in anticipation of what was the come.

They were.

Wednesday was not a good day for settling the nerves before the big day, as the market hopped to and fro.

On the whole, the Rand strengthened.

But not without some jitters along the way.

Thursday finally dawned.

It was time for some action.

Local attention was on President Zuma's State of the Nation Address.

Disruptions were almost a certainty.

Violence was very likely.

A bland and spineless speech was all but confirmed.

Although entertaining for local news & TV, the chaos did not bode well for the Rand as seen in previous events.

The whole week had built up to that point when the members of the house assembled in parliamentary hall. It was due to start at 7pm.

The SONA was seen weeks before as the highlight of this week, and for good reason.

Before Parliament had even assembled, there were already rumblings…

...but before we got to work on the event of the day, our forecast was due.

The outlook was still along similar lines to our previous one, with the expected trend to be that the Rand would be bottoming in the next couple of days, before the expected weakening would start...

Click to enlarge

The day dragged on quite a bit, as the market did the same as before, springing up and down in an undecided fashion…

...and then proceedings finally got underway, but not without a bang…

And what a night it was:

• Angry EFF threw more punches and hard hats than honest words spoken by Mr Zuma himself.
• DA walked out after taking the president and speaker of the house to pieces.
• And then the man himself proceeded to bore the house for the rest of the night.

His speech was set with the background sounds of gunshots outside the building.

But after all that, the effect on the markets was quite small…

...there were a few blips, but on the whole, there was not as much action in the markets, as there was at the SONA!

However, it was clear: the State of the Nation speech was actually irrelevant. We had got a clear picture before the president began his speech...

Markets Tracking Sideways...

Friday brought more of the same, except with a slightly more vicious element to it.

The market gained nearly 15c in the morning, and then lost it all by mid afternoon…

The end of a long week could not have come too soon, as the market drew to a close late on Friday evening...

The talk at the end of the week, was surprisingly not the flop of the week in SONA, but the new president of the USA taking action on tax in the United States.

It is worth noting with all economical and political happenings, that their effect on the market is often very small. But also, that United States happenings always have as much (and sometimes more) effect on the markets than South African events.

The US events tend to carry the clout that SA ones do not.

And this shows when it comes to an event like the US Non-Farm Payrolls - the proven trigger, time and time again.

But looking into this next week for events, it looks like we may not even need anyone to ‘trump’ up some news!

The schedule seems lined with events worth watching…

...but we will have to see what Trump and others manage to come up with, as there never seems to be a shortage of tricks up their sleeves.

Are you worried by events like SONA, shocking Trump statements and policies which rock the markets?

That is understandable if you are.

What you need is something to create some stability. Something to cut through the noise.

Try our forecasts. Free of charge for 14 DAYS.

Yup, that’s right - no money involved. Just click the button below:

As always, I would love to hear your comments and feedback - please leave a comment below.

To your success~

James Paynter