The tables turn again for the Rand, as we head back below R15/$...
...only for the tide to turn again later in the week!
With the volatility of markets today, it is so hard to keep up with the frenzy - but for once, it was the Rand on top as the Dollar endured another week of pain.
It has been an astounding unwinding of Dollar strength since the March highs...
The Dollar Index (indicator of USD strength) is now more than 10% down from it's peak up just below 103 points, trading around 90 points.
But what has changed since March, when persons were using it as a safe haven?
Has anything improved economy/pandemic wise?
You could hardly say so.
Thus showing the crazy, irrational nature of markets...
...or rather the crazy, irrational emotional nature of the humans who trade the markets.
It certainly is an interesting game to watch!
Let's get into the full review of the week...
Firstly, here were some of the biggest headlines from the 5 days:
- Biden Inauguration - the long and hard fought election, legal battles around massive fraud (and more) have seemingly ended up still with Biden's inauguration taking place without any hitches...
- US Stimulus - with Biden having Congress on his side, and the Fed supporting it, this seems inevitable...
- SARB Interest Rates - with the Reserve Bank looking for options to stimulate the economy, their options are becoming more and more limited as interest rates are at rock bottom already
- Eish-kom Botch continues - with low usage due to lockdowns and summertime, somehow Eskom has projected the next few months to be load-shedding filled...how is this possible??
With the Rand opening at R15.18, all eyes were on the market to see what the next few days had in store, with a plethora of events coming up over the 5 days.
The question on everyone's lips who was watching the global stage was: is the trauma of the last few months of the US over?
Firstly, would the inauguration go off without a hitch?
And secondly, will everything be 'back to normal' with Biden as President?
With Washington DC in total military lockdown, Biden appeared to be inaugurated in a low-key event on Wednesday as the 46th President of the United States.
As for Trump, he departed the White House after a flurry of pardons and more declassifying of classified documents, and in his final speech promised to be back in some form or other (what cards does he have up his sleeve?)
But question number 2 remains to be seen, and logically seems impossible at this point in time.
Biden would be inheriting an economy that has suffered from the irrational and crazy lockdowns of the last year which have had little to no effect on the spread of the pandemic, and have only undermined the economy. Patch up jobs of economic stimulus are not going to work - putting a plaster on a broken leg isn't going to help anything.
These lockdowns were promoted by him and his colleagues throughout 2020, and it remains to be seen now as in charge, whether they take the same approach.
Everything changes when you are the helmsman, instead of looking from outside and criticizing the one at the wheel.
The problems are far deeper than what media generally likes to talk about, as government debt continues to spiral higher. Who is going to pay? Where does the buck stop?
I would highly recommend anyone reading this to take a look at Robert Prechter's view around the time of the US election last year, and how he spelled out that it doesn't matter who wins from one aspect, as either President is inheriting an economy and stock market that is primed for disaster.
Take a look at what he and Elliott Wave International have to offer over here. It will prepare you for the future.
Back to the Rand - the market rallied through the week, until Thursday the USDZAR was near breaking the R14.75 mark following all the events globally.
In other news...
- The first test of for the new administration will be US stimulus - a major talking point for all emerging markets. The Fed's Treasury Secretary Janet Yellen emphasized the need for further stimulus and called on lawmakers to "act big". Biden has already proposed a $1.9 trillion package, another hefty weight of debt for the US to service. While it seems like the only thing to do, the country is being dug deeper and deeper into trouble...when will the debt bubble pop like 2008 with the housing market?
- Cracks are continuing to widen in the unemployment rate already, with another 900k applying for benefits this last week, and 926k the week before. While this is a modest improvement, this is still in stark contrast to the unemployment rates seen last year before the pandemic.
- Locally, SARB has continued to grapple with the economic situation, trying to see how some form of economic recovery can be worked toward. This week was the interest rate decision, and as per expectations, the Reserve Bank held rates the same. Unfortunately, it is the same position as always for SARB - between a rock and a hard place, with limited tools to make anything happen.
- And those attempts are plagued by Eskom, who in the midst of summer (and partial lockdown which limits electricity use), is unable to keep up with demand. They have indicated this will not change anytime soon either. What is going to happen when winter comes? The pandemic has been the perfect time for maintenance, taking the opportunity with less stress on the grid...but this does not seem to have happened. Now, they are paying the price...
Getting back to the Rand, the end of the week was not as pretty as the start, as late on Thursday we saw the tables turn once again, sending the market over R15 to the Dollar.
Topsy-turvy days...ones in which you need a guiding hand to help you make your forex decisions as informed, and without being affected by the emotion of it all. Read on to see how we can help with that.
The Week Ahead (25-29 January 2021) |
As we look to the week ahead, apart from all of the other points we have discussed, there were a bunch of economic events coming up:
- USA - GDP, Durable Goods Orders, FOMC Press Conference & Policy Statement, Interest Rate Decision, Jobless Claims
- SA - PPI, Balance of Trade
- UK & EU - Consumer Price Index, Unemployment Rate, GDP
There is a lot of concern and anxiety about globally with the fallout from last week's events in the US and as we head into the new week, all we can say at this point is:
Expect the unexpected!
As for the Rand, our Elliott Wave based forecasting system has served us well in calling the recent lows and we will continue to look to it to give us direction for the days, weeks and months ahead.
Please take our Rand forecasting service for a test-drive!
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.
(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
