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Rand Makes Gains Before Fed and Mining Charter Bite

By James PaynterForexJun 19, 2017 14:32
Rand Makes Gains Before Fed and Mining Charter Bite
By James Paynter   |  Jun 19, 2017 14:32
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A week which was looking so good...

Steady, smooth, and almost calm strengthening of the market from Monday morning through Wednesday, only for Wednesday and Thursday to turned things on their head!

The Fed hiked the interest rate. And the Rand reacted accordingly. What had been a good week, suddenly turned into an action-packed show.

And,then just when Rand seemed to have some counter-punches to offer, the radical new Mining Charter was tabled..

So what can we take out of this week?

It sure could have gone better, but were there some positives?

Lets take a look...

How It Happened (12-16 June 2017)

So our forecast for the week came on Friday around 11PM, giving us the updated look into the week ahead.

It was another forecast with 2 counts and a 60/40 split on the was going to be an interesting week. The expected target area was for the Rand to push a little lower before bottoming out and heading to the 12.99-13.14 target area. Count 2, the less likely at 40% was expecting the market to rise immediately before topping out...this was one of our more difficult analysis' to make.

USD/ZAR 9 June 2017
USD/ZAR 9 June 2017

Monday's news was all around what had already happened on Friday - Moody's downgrade of South Africa's top 5 banks had been just another blow to the currency. However, it was expected, and minimal effect was seen.

The market opened at 12.89/$ with the major risk for the week being the US Fed meeting. The interest rate was going to be decided and with the hike already being all but confirmed, the question was regarding further hikes throughout the year.

Apart from that, it looked like a quiet week in terms of events. It was also a short week, with Friday being a public holiday.

Onwards to Monday's events.

However, there were not exactly very many of them. The Rand kept steady the whole day - and by 8am on Tuesday, it had gently strengthened 10c over the Dollar.

This took the Rand to R12.80/$ with Tuesday before it.

It was clear that the bank downgrades had had little to no effect on the USDZAR, and that all eyes were already on Wednesday's Fed meeting.

This became even more evident throughout Tuesday, as the market kept calmly strengthening... (calm by ZAR standards anyway)

By the close on Tuesday, the market had moved smartly to R12.75/$.

We had not see 48 hours worth of steady calm strengthening like this in a long time!

And the calm just followed on through to Wednesday.

All eyes were on the Fed, but there were no pre-event jitters just yet...

In other news, oil prices dropped below $50/barrel (due to an increase in production).

Calm Waters
Calm Waters

After such a good period of downward acceleration since the start of the month of June, it proceeded to lose over 20c in a couple of hours...

The Rand had calmly plodded its way to trading at R12.75/$ on Wednesday, when the clock struck 14h00 and then things went haywire...


Out of nowhere, the market pin dropped all of 20c in a few hours...

Pre-Fed jitters?

Something else?

Difficult to pin-point any event, but clearly something was on the move.

This move meant we had to update our forecast a little earlier than normal, as we had to keep our subscribers on the ball with what was coming next.

The outlook was now with the Rand sitting at R12.6253, for there to be further Rand strength before it would then bottom out and head higher.

ZAR/USD 14 June 2017
ZAR/USD 14 June 2017

And so we waited for the Fed announcement.

The market bottomed at R12.53/$ just after 8PM...and the Fed Rate Hike was finally confirmed. A 0.25% increase, with Janet Yellen indicating a further hike to come in 2017...

After this news, the Rand spiked upwards, hitting R12.72/$ around midnight...

By 8am on Thursday, it had stabilized to 12.64...

But there was much more to come.

Fed Rate Hike - ZAR
Fed Rate Hike - ZAR

Then news broke of the release of the new radical and controversial Mining Charter


The Rand spiked like the world's champion volleyball player!

In about 6 hours, the Rand had lost 25c!

Spiraling upwards, it touched as high as R12.8991 by mid afternoon...

Phew...take a breath. A calm beginning certainly did not carry through to a calm finish for the Rand, and still with one more day to go in the week, the market was trading closer to R12.90/$ by Thursday's close...
And Friday finally rolled around - the work week had ended early for most with it being a public holiday in South Africa.

After a fairly hectic couple of days, the Rand decided to join the rest and take its own break, as it quietly made its way through the day.

Calm had finally returned, and even although the market dipped and rose a little, it seemed the dash was over.

The close came with the Rand around 12.80, and the week was officially over.

The Week Ahead (19-23 June 2017), we are probably being too hopeful.

Taking a look at the economic events line up for the week ahead, it seems as if we may just have a quiet week ahead of us.

But no. That is most probably asking too much.

The Rand can create its own triggers. Or the politicians do it.

On the other side of the pond, controversy roles on. It is now official that despite FBI Director Comey and Jeff Sessions both testifying on the matter, President Trump is now under investigation from the special counsel.

We are not sure what this will bring. But it seems that this 'witch hunt' is rolling on and on until something conclusive can come up that makes the final decision either ye or nay. If that will ever happen, is another story altogether.

But we best keep an eye on it - it is dragging the USA downwards, despite all of the good news surrounding job creation, and general economy growth.

So...what does that leave us with?

A bit of a mixed bag. But best we stick to the forecasts - they alone can give us some guidance for the week ahead.

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Rand Makes Gains Before Fed and Mining Charter Bite

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Rand Makes Gains Before Fed and Mining Charter Bite

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Forbes Magadu
Forbes Magadu Aug 31, 2017 0:51
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Great analysis looking forward to seeing what the next coming week will hold for the rand.
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