Rand Review - 13 Jun 2016

Another rollercoaster week for the markets last week, starting very promisingly for the Rand but ending the week with a whimper.

The good news on Friday (from Standard & Poor's) had not only improved everyone's mood, but had also spurred the Rand to its biggest one-day gain since December, opening the week at a rate of R15.1568/$ at 08:00 SAST on Monday morning, a whopping 60c down from where it was just 1 week ago.

The good news continued as the Short Term Forecast gave the bias for the next few days - a slight retracement before further movement downwards.

As forecasted, the rand weakened in early trade on Monday and was expected to be volatile as the dollar recovered and investors digested the news that S&P Global Ratings had affirmed the country's investment-grade credit rating.

However, from midday to the close of business for the day, the Rand strengthened drastically, undoubtedly sending Pravin Gordhan skipping about the hallways as almost 30c was gained by the Rand. The psychological barrier of R15/$ was broken, and sentiment was confirmed to be positive.

Tuesday was more or less a day of relaxation for the Rand, as it took a breather along with the rest of us, after all of its extravagant movements over the last couple of weeks. This period of quietness was probably appreciated by most!

Wednesday provided further good news, as South Africa avoided the final junk status decision from Fitch, although it warned that political and growth concerns should be addressed. This sent further waves of optimism into the market, as a new low for this quarter was set just short of R14.65 to the US Dollar.

Wednesday provided further good news, as South Africa avoided the final junk status decision from Fitch, although it warned that political and growth concerns should be addressed. This sent further waves of optimism into the market, as a new low for this quarter was set at R14.6527 to the US Dollar.

Breaking news hit late on Wednesday showing that South Africa's economy (GDP) had lost all of 1.2% in the first quarter of this year. This was not the news that we wanted with everything looking so positive.

Thursday's forecast signalled that the Rand was expected to weaken in the short term, but that this should be limited to the 14.86 to 15.13 area.

The market moved up into this target area on Thursday and continued to move higher in this zone during Friday as the dollar bounced back from recent weakness, adding further pressure on the currency following a string of poor growth figures.

After local hours trading saw the Rand weaken still further beyond the ideal target area for this pattern to close the week at 15.2334, giving up all the gains made during the week.

As we head into the new week, the Rand fortunes are not looking nearly as positive as last week, with the possibility of further weakness ahead, with 15.5203 resistance levels being critical to direction in the weeks ahead.

This week has two major market moving events, with local Q1 Current Account and US Retails Sales on Tuesday, Fed interest rate decision and policy statement on Wednesday. Release of Bank of England minutes could also have some impact on the Dollar and Rand.

So another humdinger of week is likely ahead.

As always, I would love to hear your comments and feedback - please leave a comment below.

To your success~

James Paynter