Welcome to our Weekly Rand Review for 24 October 2016, where we take a look at how things unfolded last week and give you our thoughts for the week ahead.
BREAKING NEWS ALERT:
The NPA has announced it has dropped charges against Gordhan!
The NPA has announced it has dropped charges against Gordhan!
Lots of worrying volatility, but did much really come out of this past week?
Choppy, sideways and undecided movement appeared to be the theme for the week, as the Rand did little to inspire investors and us at Dynamic Outcomes, with confidence.
However...with a week of more drama (state capture reports, NPA not backing down & Gordhan's budget speech), the Rand seemed to take very little from the goings on, overall.
To put this in perspective: The difference in price between 8am on Monday and 3pm on Friday, was less than 10 cents.
As you well know, even though there can sometimes not be any definitive movement in a week, a lot can actually have happened.
Was this the case this past week? Let's take a look...
How It Happened (24-28 Oct 2016) |
The week began at a similar level to the past few weeks - it was bordering on the R14/$ level, but was holding in the mid 13.90s. With this slightly precarious position in mind, we set to work on our Monday morning forecast.
The trend for the next few days showed (see below - click to enlarge) that we were to see a short term strengthening of the Rand into the 13.74-13.54 areas.
Click to enlargeMonday for the Rand was a bit like most of our Monday's - pretty flat!
As if still recovering from an exhausting long weekend, it meandered its way to the end of the day without covering too much ground in either direction.
Sometimes when a day like this happens, we begin to second guess ourselves as to the forecast we have put out. But patience is a virtue, and our forecast was for the next few days, not the next day! So we waited to see what Tuesday would bring.
And as Tuesday opened, the Rand began to act, moving down into the sub 13.90 levels...and then still further as the day went on, below 13.80 to the Dollar.
By the end of the day, the Rand was right on the borderline of our target area, sitting just a cent above at 13.75. Just a bit more was needed to gently push it into our target area, before we could see a retracement.
Wednesday brought exactly that.
The Rand punched into our target area with vigor, touching its best level of 13.68 to the Dollar in over 3 weeks. So, our forecast was validated after all on Wednesday morning - one just needs to learn to have a little patience!
However...unfortunately for those who were hoping to see the Rand continue to strengthen, that was the end of that for the week, as the Rand went on its way from there.
By mid-day it was above 13.80...
...by mid-afternoon, 13.90...
These movements was very likely linked to the events which were occuring that time: Pravin Gordhan's Mini-Budget speech as he attempted to prevent economic disaster while fending off corrupt politicians.
Some extracts from Gordhan regarding this can be found by clicking here - he is certainly not backing down!
This was as well as the USA Trade Balance which went off at 14h00, and is a known trigger for a medium reactional movement.
The reversal was no doubt disappointing for some...
...but it fell perfectly in line with our forecast.
Our subscribers were therefore kept ahead of the game - which is always very satisfying to see.
Through the early hours of Thursday morning, the Rand was seen to push higher still, closing in on 14 to the Dollar again. A vast 30c move since the day before, and the tables had certainly turned.
Once again, it was time for Thursday morning forecast - one which was arriving at an important time for the Rand after it bottomed out in our target area.
This showed that the market was expected to continue higher, with the chance of some retracement.
Click to enlargeFrom Thursday morning onwards, the Rand was a bit up and down, with nothing too clear in terms of direction.
But then in afternoon trade, when US Durable Goods Orders release hit, it broke below the 13.68 support level, delaying the preferred wave count. And then soon after pushed back above this level.
The packed schedule for events was certainly providing plenty opportunity for volatility, as we saw no less than 13 events worth noting!
Economic Events for 24-28 October
This is a screenshot of our Rand Fundamentals - a feature only available to our premium subscribers. If you are affected by short term movement, insight into these upcoming events could have been of great value to you. Click here to see what else our premium subscribers get.
Friday morning saw the Rand increasing volatility once again, rising sharply before falling just as sharply, as the market battled to find direction.
As the afternoon/evening slowly wore on, it looked as if the Rand would settle at a fair mid 13.80s level which really was not far at all from where we had begun on Monday.
It seemed we would have to declare the week a dead heat!
The Week Ahead (31-4 Oct/Nov 2016) |
The NPA drops charges against Gordhan!
Well, this week has certainly had a surprise start to set the tone for an already-expected humdinger of a week, with Shaun Abrahams (National Prosecuting Authority) announcing at an impromptu news conference this morning at 10h30 that the charges against Finance Minister Gordhan are being dropped!
Gordhan 1 Zuma 0
And the Rand has surged as a result ...
...and in so doing, has breached the 13.6857 invalidation level for the preferred wave count in Friday's forecast.
So where to now?
This morning's update (before this announcement) showed two possible scenarios playing out short term.
With the break below 13.6857, the alternate count shown in today's update now has become the preferred scenario.
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Well, certainly some good news to start the week.
But if you think that is the volatility behind us, think again!
There is risk aplenty this week, with some big data releases.
And then we have the court hearing for Zuma's interdict against the release of the State Capture Report (trying to delay the inevitable...).
And of course, we have the build up to the US elections next week, and the flurry of scandals continue, with the effects of FBI's renewed investigation into Clinton's emails (announced on Friday) still to be seen.
Brace yourselves for this - this is going to be a rough ride!
So once again, it comes back to this same question: How are we to get through this next big event?
Simple.
As always, trust the Elliott Wave Principle.
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To your success~
James Paynter
