Rand Review - 20 Mar 2017

Well...

Where do we even start reviewing a week like this?

In perhaps one of the most startling turnarounds of the year, the Rand pulled off a heist of note, and turned the whole week around midstream...

...despite widespread expectations

...despite the US Fed Rate hike

...despite rumours of cabinet reshuffles

...despite the SASSA crisis getting steadily worse

...and who knows what else...

Despite all the above - the Rand actually strengthened!

Not only did it strengthen, but it crushed the dollar over 50c in a few days!

So... where to start?

Where else, but Monday with our first forecast for the week!

Global markets were seen to be on high alert from the start, as an influx of top tier data was waiting in the wings. The ride ahead was expected to be rough with all of the events upcoming...

US Inflation figures, Fed Rate Decision, Dutch Election, BoE Interest rate, and chances of Trump budget for 2017/2018 where all on the cards...

...there was a lot at stake over the next 5 days!

To begin with, we issued our forecast for Monday (see below - click to enlarge).

This showed the Rand in the early R13s, and was expected to be bottoming out shortly, in the R13.10-13.00 area. After this, the Rand was expected to move up to test R13.20 which would prove pivotal to direction...

Click to enlarge

...and for the most part, the rand was calm.

Very gentle movement was there throughout the day, but mostly with a sideways direction.
The ECB speech seemed to go off smoothly enough, having very little effect on the Rand.
The Rand was left with a small (well...small in ZAR terms!) range of R13.19-13.06 after the entire day's movements.

So then it was time to move on to Tuesday to see what it would bring.

And that was when our forecast was validated, as the market moved in line with what our expected trend from Monday was.

On Tuesday morning, the Rand moved to make its worst level of the week so far, punching higher to touch a mark of R13.24...

...it immediately then dropped back under R13.20, steadily strengthening to end the day sub R13.15.

And that was about when the whole game changed for the week...

Wednesday was the big day.

It was that time again - Fed Interest Rate Decision!

That coupled together with a slew of economic events meant that there simply HAD to be some reaction from the markets.

And so there was.

With:

• USA Retail Sales at 14:30
• FOMC Press conference at 19:30
• USA Fed Monetary Policy & Interest Rate Decision at 20:00

There was little chance of the Rand escaping unscathed, according to all mainstream financial media.

The impact of the seemingly all-but-confirmed Fed Rate Hike was expected to have a bad effect on the Rand, sending it spiraling into further gloom...

...these expectations could not possibly have been further off the mark.

During the course of Wednesday, the Rand was stable but strengthening.

It rumbled its way through all the events, eventually making it to the Fed Rate Hike Decision at 20h00, having gained 10c on the Dollar during the day.

And then...the lid blew off the pot...

Boom.

There sure is no substitute for the action that the Rand brings.

30c.

In just 2 hours.

......

Just read that again and take it in!

In one swift move, the Rand had taken every expectation and thrown it own the window with one vigorous pin-drop!

The Fed had raised interest rates just as expected, which was meant to have a bad effect on the Rand - and yet it just the opposite had happened!

The market kept moving throughout Wednesday night, and by the time business opened up again on Thursday morning, their had been a consolidation and then a continuance of the movement already.

So by the time our forecast came out at 8am, the market was sitting at R12.81/$, and the expected outlook was shown (see below - click to enlarge)

Based on the Elliottwave principle, we were to see the market consolidating briefly, before it would then strengthen further down into the R12.71-12.51 area...

Click to enlarge

Thursday saw the market dip into the target area before consolidating and tracking sideways.

By the close on Thursday, we saw the market had retraced a tad to a level of R12.75...

...leaving just one day left in the week.

A strange calm followed on Friday...

The Rand plodded along, not showing too much commitment in any direction at all.

The markets seemed to have had enough for one week, and gentle tracking sideways was all they were up to.

It was quite an unusual end to a week, with the markets pottering their way between 12.80-12.70 for the most part of the day.

Not that we are complaining...

It gave us a chance to breathe, and to look ahead to the coming week...

The week ahead brings some interesting prospects.

There are some events, and one which may have little effect on the markets, but will be very interesting to keep an eye on is the settlement agreement between Citibank and Competition Commission.

This goes back to the bank collusion scandal of last month, involving multiple international banks being involved in illegal collusion & trading to suit their ends.

This hearing is due on Wednesday, 22nd of March.

As well as that, the week is once again packed with some more big events, and all of them are worth keeping an eye on.

We give all of these events categorized by influence on the market to our clients... if you are interested in getting access to these, please let us know.

It is always hard for us to write thoughts for the week ahead...

...not for lack of things to speak about, but to try and give you, our valued client, something which cuts through all the noise and helps give real value.

If ever there was an example that news does not determine market direction, this past week was one - leaving economists and experts flummoxed.

Don't get distracted by it with all that is happening.

Focus on what is important - and that is what the pattern of market sentiment is telling us...
And to help you do so, we are offering you up to 28 days of free trial access to all of our forecasts!

Click the link below to get signed up now:

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

To your success~

James Paynter