Rand Review - 20 Feb 2017

What a comeback!

After attacks from all corners with a horrendous State of the Nation, Bank Collusion scandals and more, the Rand pulled some wonderful tricks out the hat this past week.

Most would have expected there to be Rand weakness...

...but not so, as the Rand came storming back, breaking records and levels we have not seen in a long time.

And, finally, something for persons to cheer about!

Not to say it did not come with its fair share of volatility too...

But, let's get right into going over how it all happened, as this week was one to remember...

Monday morning.

As another week started afresh, the Rand was on the back of a crushing previous week.

Sentiment was bad after the SONA circus.

And not many expected the Rand to come out with minimal after effects...

...but, this was the Rand. Anything was possible.

So when our forecast arrived for Monday, the outlook was looking like this (see below - click to enlarge).

The preferred wave count showed the Rand was expected to bottom out soon, but there was a crucial level we needed to watch...

...if that level was crossed, then all the wave counts changed. This was going to be a crucial one.

With the market trading at R13.31, the crucial level to watch was a mere 15c beneath that, at R13.1685/$. This level made all the difference, and if the Rand crossed it, then we would see some action.

Click to enlarge

The Rand was expected to be affected by Trump's decision of tax cuts, so some persons were watching that very closely as we headed into the week.

As it happened, Trump was a bit too busy with other problems to go near the tax cuts for this week!

Through the course of Monday, the Rand strengthened steadily towards critical levels but not quite getting there.

Tuesday business day dawned with the Rand at 13.25, having gained in price and momentum, and it didn't take long to show its intentions..

Soon the market was below R13.20... then past the crucial level of R13.1685/$ (a support level that had been hindering it for months)... and by local close was sitting at R13.10 - its best level since October 2015!

(The timing could not have come better, with the expected petrol hike coming next month, some relief was needed...)

Due to the Rand crossing the critical point, we had to hot foot it, and update our forecast to the latest situation and the revised preferred wave count.

By Wednesday morning the Rand had broken down to a level of R13.04 when we completed the forecast (see below - click to enlarge).

The updated outlook based on the sentiment analysis was for the Rand to strengthen further, but only briefly, before bottoming out in the R13.01 to 12.83 area.

Click to enlarge

As always with these sharp moves, there was a often a retracement before the market continues its trend. As it was the case here, with the market moving back up over R13.15 on Wednesday afternoon.

But after business hours, the Rand was back on the warpath again, thrusting stronger.

In just a couple of hours, the market strengthened 25c in the Rand's favour!

This took us down to R12.89 - the best level we have seen since August 2015!

What makes this all the more amazing is the news which hit just on Wednesday afternoon...

Banks around the world, 17 of them in fact, have been charged with collusion. The definition of the word is as follows:

"secret or illegal cooperation or conspiracy, especially to cheat or deceive others"

Investec, Standard Bank, Barclays, ABSA together with 13 offshore banks have been working together. Using live chat platforms and telephone calls, they had been coordinating trades and creating fictitious supply and demand...

...all this to move the markets in their favor to get the margins they wanted!

It is the scandal of the decade... the fact that multiple banks were working together to try and move the markets for their own ends!!

This has been going on since April 2015, so expect some heads to roll over this one...

...and yet, the Rand had pulled off such an admirable performance!

A good looking chart for once...!

So when the clock clicked past midnight on Wednesday, Thursday began with the Rand trading at R12.90/$...

It was quite something to see the Rand behaving this way despite all that was going on around it.
Poor investors seemed to be developing some thick skins, and were managing to keep the SA currency going!

The currency was rated among the top 10 best performers this year, despite all that has gone on...

...but as per our forecast from Wednesday, the Rand was due to bottom out.

And so it did.

The Rand's best level from Wednesday was R12.88, and that was where it stayed.

From the start of Thursday, the market turned around and began weakening. The ride was pretty choppy throughout the day, as it jumped around a little.

It was not until 5pm that there was definitive movement. The Rand weakened over 10c in a few minutes, and that looked to be the confirmation of the bottoming out...

And then there was one day left in the week - Friday...

...and the Rand, after a breather throughout the night, was on the move again first thing on Friday.

From a low of R12.96 at 8am, it was nearly 20c higher just 4 hours later...

It had not taken long for the market to bottom out, and we were well over R13/$ again...

Yet, this was exactly in line with our forecast from Wednesday. Our subscribers knew well in advance what was coming.

Friday afternoon brought a few more tricks with an element of suprise. The market strengthened almost 10c mid afternoon, but it did not last long, as the market slowed up...

As the week gently cruised to around R13.05, all was fairly calm on the markets front. But it had sure been Quite a Week...

So as we head into the new week, there are a number of talking points which are on person's lips...

Namely:

• Trump and his tax plan... when will he release the information on this?
• Trump's new travel ban executive order... what effect will this have on the markets and will this be signed soon?
• The Bank collusion scandal... when are we going to see some actual action on this and what will the effect be?

In terms of economic events, there is enough on the table to keep things interesting too.

So plenty of noise and prospective action...

...but do you have any clarity on actual market direction?

Try out our free trial. It is an opportunity to get a clear picture without all the news.

Plus, it is free to try. You only need to pay for it if you wish to carry on after your trial.

Click below to give it a shot:

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

To your success~

James Paynter