Welcome to our Weekly Rand Review for 8 August 2016, where we take a look at how things unfolded last week and give you our thoughts for the week ahead.
There was always bound to be some definitive movement in this past week, with two major events - Municipal elections and US Non-Farm Payrolls. While these events do not move the markets in themselves...they were likely to be big triggers for persons to take action or react and emotions were bound to be running high.
How It Happened (1-5 Aug 2016) |
When the markets opened below R13.90/$ on Monday (after Friday's skydive of the Rand of around 30c), cautious optimism was evident, and it had definitely given the public something to cheer about.
But apprehension was still apparent with many holding back on their trading decisions pending the Election outcome, with most (apart from those on the inside track, of course) quite knowing what to expect...
Our outlook on Monday morning (see below - click to enlarge) showed that the Rand was due to bottom out shortly, and we were to expect a slight retracement in the coming few days.
Click to enlargeThe Rand duly followed this forecast, as it broke below its previous record low for the year, when it touched R13.77/$ around midday on Monday. It did not go any further, as it began its steady retracement after that. By the close of business for the day, it was back up to just below 14 to the Dollar, validating our forecast perfectly.
The Rand was the currency that was predicted to perform the worst in emerging markets this year by economists, but has turned out to be one of the strongest amid Brexit aftermath...
...most confusing to some, but not to our subscribers.
Despite slightly choppy movement on Tuesday, the Rand steadily weakened throughout the day, gently pushing above the 14.00 mark, as the country prepared for Municipal Elections.
These elections have been named the most important elections since 1994, as competition was fierce, and the ANC was beginning to lose its grip. This meant that all eyes were on these elections...
What would the outcome be? What effect would the outcome have? Would the Rand crash if the ANC maintained power? All such questions were being thrown around, with everyone having a different view on the matter.
It is very easy to get suckered into this way of thinking, but in fact the elections will not have any effect on the markets. People tend to forget that this is not the case. The fact is:
Wednesday. Voting day. Enough chit chat, and time to begin with the real event!
The markets moved against the Rand initially, as a high of 14.06 was reached on Wednesday morning. However, the Rand went no higher than that, as it just steadily turned on its heels and began to strengthen once again. This validated our forecast and moved us into a good space on the Rand for the coming few days. The majority of the day was fairly calm on the markets side of things.
Before the end of business hours (for those who actually worked a full day! 🙂 ) the Rand had moved back under 14 to the Dollar. It moved even further after hours, as the first results of the elections began to come out.
By the time business began on Thursday, it was under 13.90 to the Dollar, and our short term forecast had been updated to give us the route for the remainder of the week.
The outlook (see below - click to enlarge) was good. It showed that the move over the previous few days was going according to our wave count, a slight retracement was due before the further strengthening of the Rand.
...And the Rand obliged by following our forecast!
It touched a high of 13.96 to the Dollar before turning on its heels and plummeting. In a similar movement to the one on the prior Friday, it sunk like a stone in a matter of minutes, taking it well below 13.80, with no sign of stopping!
Very soon after it had broken its record low for a 4th time, as it punched below the 13.77 level from Monday. This was put down to some optimism in seeing the DA initially gaining a lot of support in the elections, compared to last year.
All we knew is, it validated the the trusty Elliott Wave Principle, once again.
The eventual low on Thursday was one of R13.66/$! What a week this had been for the Rand, despite all volatility surrounding it.
Friday was uneventful for the most part, as the Rand stayed in the mid 13.60s until mid afternoon. However... At 15h00 sharp, the Non-Farm Payrolls fired off.
The Rand's reaction to this event was not something anyone wanted to see, as it virtually lost all it had gained in the week, bouncing off the low for the week of R13.61 (right inside our target area), all the way up to the mid 13.80s!
But, before the markets closed for the weekend, the Rand was back to a respectable level, under R13.70. As always, these big events often give short term aberrations, but within the overall existing trend of the market.
However... It is very worthwhile knowing when these events are going to happen, otherwise you can be caught out very suddenly.
The Week Ahead (8-12 August 2016) |
The Municipal Elections are over, but the dust has not settled yet. The ANC are licking their wounds following losing control of 3 major metros (Nelson Mandela Bay, Johannesburg and Tshwane), and all eyes are on coalition negotiations, with Julius and his radical band pivotal in the latter two.
While we cannot predict people's reactions to the DA gaining power in certain metros (or what the outcome of the coalitions will be), we do know that the Elliott Wave Principle can be used regardless of major political/economic/social events, and have learnt to trust that the patterns tend to play out irrespective of what events are unfolding.
For this reason, we expect the forecast we published this morning to hold steady.
For those of you who are not subscribed to our forecasts already, if you have any Forex involvement you need to have a game plan. Otherwise you are taking pot shots in the dark. If you have not already, get subscribed to our free trial today, to see what a difference and saving we can make.
As always, I would love to hear your comments and feedback - please leave a comment below.
To your success~
James Paynter
