Welcome to our Weekly Rand Review for 11 July 2016, where we take a look at how things unfolded last week and give you our thoughts for the week ahead.
Peace and harmony with the Rand doesn't always give us all that much to write about, but we were very glad of it for the previous week (27 June - 1 July). It meant that there was an air of calmness and stability when the markets reopened for the new week.
What a refreshing change after the weeks of action-packed movements!
How It Happened (4-8 July 2016) |
The Rand reached its strongest level in more than a week to the dollar on Monday, after opening at R14.54/$ at the start of the business week.
Our outlook on Monday (see below - click to enlarge) showed that the gentle but steady strengthening of the Rand could not go on forever, as it was due to bottom shortly, after breaking into the target zone of 14.50-14.30.
Click to enlargeIt duly did so on Monday afternoon, touching 14.45 to the US Dollar before beginning its upward retracement. By the end of Monday, it had weakened 10c, and the bottoming out was confirmed. Not the signs most South Africans wanted to see, but it validated our forecast, proving once again the strength of the Elliott Wave Principle.
On Tuesday, the Rand proceeded on its climb, weakening steadily. A top of 14.85 was hit just before the close of business, which sent a few tremor warnings throughout the country.
The Rand dropped by over one percent against the dollar on Tuesday, which was put down to weaker Asian markets, a faltering post-Brexit rally and poor South African jobs data putting a dent in the currency. While speculative economists were making up a story out of each event - in hindsight - all we saw it as was a validation of our forecast.
Further weakening continued on Wednesday as the Rand pushed up to top out at R14.95/$. At this stage it had the possibility of going just a bit further before strengthening. Once again, the weakening was put down to Brexit fears, which are still quite apparent.
After hours on Wednesday, it began to look as if the Rand had topped out at the 14.95 mark, and was now on its way back down again.
The rand steadied early on Thursday as upbeat US economic data and expectations that the Federal Reserve would not raise interest rates. It had strengthened back to R14.75/$ by the time our forecast for the next few days was done.
The outlook (see below - click to enlarge) was promising for the Rand, with the bias being for more Rand strength, but with the alternate wave count showing a possibility of the Rand weakening further if the 14.4574 level was not broken below.
Thursday provided a quiet day, with the Rand seemingly lying in wait for the US Non-Farm payrolls which were due on Friday, 14h30 SAST. This event is a notorius trigger for some of the biggest market moves.
The Rand was a bit firmer on Friday and extended its run of minimal movement between Thursday morning and the Friday's Payrolls.
On the stroke of 14:30, the sparks began to fly! The Rand weakened 12c in a few seconds and then strengthened 20c in the next minute or two. This is why the Payrolls are always one to watch out for!
Normally, they are enough to upset the applecart for a few hours, but after that, the general trend resumes as the dust settles. As was the case this time, with the Rand strengthening after the close of business to end the week under 14.60 to the Dollar.
So once again, a week with a few scares, but leaving us fairly happy with the proceedings, once all was said and done. The Rand has completely recovered from the Brexit Whiplash, and is looking a bit more promising at the 14.50 levels.
Pound/Rand Hits Our Target |
While the going for the Rand has not been a picnic against the US Dollar, its performance against British Pound has been spectacular, having seen a 25% recovery since January, as it broke below R19 late on Friday afternoon!
This severe Pound weakness has taken many by surprise, but that isn't the case for our subscribers, as we have had this level firmly in our sights since 6 June - 2 full weeks before Brexit (see below - click to enlarge)
If you have Pound exposure, AlexP, this could have saved you over 10% on your exchange.
On exchange of just £1m, by waiting (imports) or exchanging (exports) at the right time, this would have meant a saving of at least R199 700 (from 21.2370 to 19.2400) on one single transaction.
I am pretty sure your bank balance could have done with this little boost!
The Week Ahead (11-15 July 2016) |
We always say it, but an important week is once again ahead.
While the immediate outlook is Rand-bullish against the Dollar and Euro especially, some important levels need to be broken to see this trend extend through the week.
The big news events to watch out for this week are Bank of England interest rate decision on Thursday at 13:00 and US Retails Sales on Friday at 14:30.
And the rollercoaster ride continues...
As always, I would love to hear your comments and feedback - please leave a comment below.
To your success~
James Paynter
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