Well, well… it seems the elastic stretched just a little too far and snap went the Rand back to R17/$!
This had been coming for some time with the overextension of the Rand's strength and the Dollar's weakness...
...so a bounce was due - but who could say when it would be?
Well, that is where our Elliott Wave based forecasting system comes to the fore, and it meant that our subscribers saw this one coming.
Read on to see what they received to give them a warning well in advance - and to get a look at all that happened during the course of the 5 days...
So, first things first, this is what our subscribers received on Thursday the 23rd of July, ahead of the whole week's Rand movements.
It saw the market sitting at R16.68 following a break higher from where it had touched R16.3403, and so long as we did not break that level, the target area for the coming days saw us heading up to test toward R17/$...(see below - click to enlarge)
Along with that, were our outlooks on the Euro and Pound against the Dollar, showing similar pictures - see below and click the image to enlarge...
So we were in for quite a few days...
And with all the events that happened over the coming few days, there were triggers aplenty:
- IMF Loan - in what was labeled as a 'watershed moment' for South Africa's economy, the IMF came to the party and approved the loan for SA
- US Q2 GDP - while GDP figures were expected to be bad, the shock of seeing a GDP decline 3 times worse than ever in recorded history left many open-mouthed...
- US Stimulus - all the while, congress fought over the details of the next stimulus package as more jobless claims rolled in
The Rand opened the week in the mid R16.60s against, and we actually saw the market strengthen on Monday...
The IMF news was the bright spark for the day, as they approved South Africa's $4.3bn loan to help the pandemic fight. However, analysts saw it as much more than this, some even calling it a 'watershed moment' for the country's economy. A reief it may be, but the concern will be It will really come down how the funds are used, and how the debt is to be financed going forward.
In a statement the IMF said, “There is a pressing need to strengthen economic fundamentals and ensure debt sustainability by carrying out fiscal consolidation”. The terms of the loan are relatively light compared to normal loans from the fund, which is interesting.
The magnitude of the loan must not be underestimated with this being the single biggest allocation of emergency funding from the IMF yet...the onus is now on Cyril & co to deploy it wisely.
Anyway, this news triggered us to move stronger to test as low as R16.35 on Tuesday morning, very close to our R16.34 support...
...but the support held strong, and we saw the market turn again.
We drifted as high as R16.60 before we had another test of sub R16.40 levels, with the Rand playing a few games - but our count still very much in play.
On Wednesday came our next forecast, with the Rand trading at R16.54, and the target remaining at over R17 to the Dollar, with the R16.34 support still holding strong… (see below - click to enlarge)
And once again, here were our outlooks on the Euro and Pound, showing very similar expectations to the USDZAR market, although both had already moved weaker...(see below the forecasts - click to enlarge)
On Wednesday night came the US Fed Interest Rate Decision & policy statement - and they unsurprisingly confirmed that interest rates will remain unchanged at 0.25%.
The Fed did confirm that it will utilize its “full range of tools” to continue supporting the battered economy.
And then it was on to Thursday, which was the day that the action began, with the Rand spiking up to touch R16.90 through the day's trade, confirming our forecasts.
This was as the markets waited in anticipation of the US GDP news - surely one would think these would weaken the USD significantly?
Well, out they came - and at a shocking 32.9%, the worst reading since WW2!
The brain is boggled by just how drastic the lockdowns have been for economies...
The Rand had a temporary blip, but then continued on its way weaker, defying logical expectations, once again...!
And then in other news:
- In amongst the chaos of the pandemic, there have certainly been a few beneficiaries - one of them being Gold, as we saw it skyrocket to all time highs, testing close to $2000 - syncing up perfectly with the Dollar's decline to test levels last seen more than 2 years ago back in May 2018.
- The SA government announced that intraprovincial leisure travel will now be allowed under level 3 lockdown, in an attempt to assist the ailing travel and tourism sector which was on course to lose 400 000 jobs.
- Also locally, the government confirmed receipt of the relief loan from the New Development Bank for a fat $1bn, further strengthening the ties between South Africa and the BRICS nations. How much more money will yet be needed to drag the economy up out of the gutter? And then will the extra debt be sustainable? These questions remain...
- Over in the US, we saw a second week of increasing jobless claims, with the pandemic fight far from over. Just when it appeared things were under control, it seems as if the tide is turning again. While this was going on, Congress debated the next stimulus package called the HEALS act, to iron out the final details on unemployment benefits and more - and discussions were not moving along fast as previous unemployment benefits lapsed. We wonder if this will be the last package? One would certainly hope so, as they continue to stack up the federal debt...
Getting back to the Rand, it was more of the same on Friday, as we saw the market up to testing R17 to the Dollar, with the USDZAR now 70c weaker than it was halfway through the week!
As for the EURZAR and GBPZAR, we saw them trading as high as R20.22 and R22.45, respectively - rushing higher as per our forecasts to confirm a break higher.
Once again, the Elliott Wave based forecasting system had called it…
Sentiment is a funny old game. We get too caught up in it ourselves to make good decisions. That is why an objective system, while not perfect, is so powerful in providing clarity in the markets in such times as these.
What a week it was, as it came to the SA close with the Rand just a shade over R17/$...
The Week Ahead (3-7 August 2020) |
As we look to the week ahead, we have several important events coming up over the next few days:
- USA - Trade Balance, Jobless Claims, Non-Farm Payrolls
- UK & EU - Retail Sales, Interest Rate Decision, Monetary Policy, BoE minutes
Some of the more interesting ones are certainly going to be the NFP from the US, as well as jobless claims and UK Interest Rate Decision.
And not to forget the ongoing stimulus debates in the US.
So, with all these events, where will this leave the Rand?
Well, for good measure, I will repeat what we stated last week:
What it melts down to is mass human sentiment - emotional decisions triggered by the above events (and sometimes by no events, but reaction to market movement itself).
The balance of all the emotions of all the persons involved in the Rand market will dictate where the market is headed...
...but the problem is that those same emotions are your worst enemy.
When the market is highly volatile, it is extremely difficult to make rational and educated decisions that often mean doing the opposite of what your emotions are telling you.
And that is why we continue to rely on our Elliott Wave based forecasting system to give us a scientific-based objective view of where the market is likely headed in time and price.
Last week no doubt caught many surprise -
I sincerely do trust that YOU were not one of them...
...because this week is not likely to be any different!
(You don't want to regret not having done so this time next week...)
Look forward to hearing from you.
To your success~
James Paynter
