Rand Review - 13 Mar 2017

A week which began so well for the Rand...

...and then it all fell down in a heap.

The past few months have seen consistent strengthening for the Rand, leading many to think that it was some kind of miracle that we were going to see levels like this for some time yet...

...they were wrong!

The house of cards of positive sentiment which had slowly been built up with the Rand's ongoing strength suddenly was hit by a cool breeze - and then collapsed!

Before we knew it, the Rand had punched 30c in the other direction

Surprise for most...

...but you could have seen this all coming!

Read below to find out the WHY and the HOW..

From the outset, we had identified this week as being a biggie.

Sentiment was seeming to be reaching an extreme, and with the amount of events during the week, something had to give.

So as action started on Monday just sub R13/$, there was a lot of expectation...

Before our forecast was even released, the Rand had gained 10c during the early hours of Monday morning.

When the forecast was released (see below - click to enlarge) it showed us a tight 60/40 split on the forecast. The Rand had either bottomed our or was due to bottom out in the next few days... after that, we were to expect Rand weakness into the R13.27-13.42 area.

Click to enlarge

Minimal economic events meant that there was not much action expected during the course of Monday.

Such was not the case...

...the Rand had its own ideas and hopped back and forth on Monday.

To put it in simple terms:

Tuesday brought a fresh start.

But unfortunately not that good of a one from a news point of view.

Despite the Rand strengthening for the first half of the day, the movement was choppy. On top of that, the news finally arrived as to South Africa's GDP arrived in the late morning, and it did not make good reading.

A mere 0.3% growth< gave insight into just how precariously this house of cards was stacked... But for the most part of Tuesday, the Rand actually held it together. Moving into a sub R13 level by the close of the day was a much better than expected performance.

And then there was Wednesday.

Our forecast was yet to be validated when the day started, and we were really starting to watch the markets carefully for when the Rand was going to make its move.

Which it did, starting 9am on Wednesday morning.

It is said that "a picture tells a thousand words" This one certainly holds true to that statement.

The next two days brought nothing but Dollar strength, as the Rand was trampled and kicked with no sign of mercy being shown.

Strong US trade numbers seemed to be the trigger that spiked a fresh rally in the US dollar across the board.

By the close on Wednesday, the Rand was at R13.14/$.

And then we were onto Thursday, which was our next forecast day.

The outlook was much the same (see below - click to enlarge) but it was now confirmed that we HAD bottomed out, and were to expect some serious movement in the next couple of days.

It looked like all one way traffic from here...

Click to enlarge

...and it sure was that, at least for Thursday.

The Rand tanked throughout the day with seemingly no end to its torrid two-day run!

By Thursday night, all of 20c had been lost during the day, with one sharp streak of momentum marking a difficult time for the South African currency.

Panic seemed to be gripping the market as the reality of the impending US interest rate hike finally hit home...

So yes, it seemed to all be running with the Dollar by the end of Thursday...

...with just one day left in the week and with the biggest event still to come, it definitely was looking like the Rand was going to be ending the week on the back foot!

The Rand had rollicked its way up to R13.37/$... what was going to stop the run?

Hope had changed to despair (or for exporters, fear had turned to confidence) ...

But...

...the market had moved exactly into the target area we predicted. So this was no shock or mystery to us or our clients - merely our forecasts playing out.

But it is never the time to be complacent - we always need to watch... carefully.

...the market always has a few more tricks up its sleeves.

And on Thursday evening, the market topped out.

All of a sudden, the one way traffic had stopped.

And the Rand began strengthening...

...dropping below R13.30 to the dollar early on Friday morning

Friday brought the event of the week, and quite often the event of the month: Non-Farm Payrolls.

Was it going to have an effect this month?

You bet!

A position of weakness suddenly became one of strength as the Rand pin-dropped over 15c to the Dollar in an hour, and suddenly was trading at R13.12/$!

Despite the US Job numbers coming through even higher than expected, the Rand strengthened... confusing, not so?

Just another classic example of the connection between market direction and news - there isn't one.

After that, as was expected, it retraced back again, and ended the week around R13.17...

A rollicking week - but the US Dollar certainly took the spoil home this time round...

So...

Staring into the crystal ball for the next week, there are a few things we can identify which are worth watching.

And while these are mostly all speculative events, they are worth keeping an eye on more for the timing than the effect they will have on the markets.

We don't believe in the news for giving us market direction.

However, news and events are often turning points or triggers:

• Economic events - some biggies coming up this week from Central Banks across the globe - European, English, Japanese and US.
• Political events - Dutch elections and the effects of Trump's new travel ban could provide some real fireworks
• Global and US sentiment - stock markets have taken a breather after hitting record levels - where to from here?

See a common denominator with the above?

If things are out of our control, we cannot obsess ourselves with them.

But we need some objective information that enables us to make educated and informed decisions to manage our exposures and risks.

"How and where do I get this information," you might ask?

By analyzing past patterns of sentiment, we are able to provide an insight as to where the current pattern is likely to take us for the next few days, weeks, months & years.

And for a limited time, you can get this completely free..

Simply click the link below to get started on unravelling the Rand's mysteries:

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

To your success~

James Paynter