Rand Rides The Wave Stronger...But For How Long?

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When luck is riding your way, just go with the flow at least that was the case for the Rand , as it once again flipped the script to hold its own against the Dollar!

It has been a year of constantly-changing trends, and right now, the Rand has enjoyed three good weeks that have seen some substantial recovery from the previous highs.

This last week saw the Rand testing levels nearly 100c stronger than 3 weeks ago, and it has done it so quietly and steadily that it has almost gone under the radar.

And why it was flipping the script is that there was little to no economic or fundamental reason for why it should be that the Rand has gained so much.

Yet, here we are.

Proof once again that over the short and medium term, markets are moved by the underlying mass sentiment, not fundamentals.

Anyway, let us get into the full review and see what we can draw from this past week as we head into the next.

Key Moments (30 May - 3 June 2022)

Here were some of the biggest headlines from the 5 days:

  • Comair (JO: COMJ ) Grounded - all out of funds, all of Comairs flight were cancelled pending further investment, the effects of this will be widespread!
  • KZN Flooding - disaster after disaster for the Kwa-Zulu Natal province, as the storm is not over yet.
  • Oil Prices - as the EU made big moves on Russia's oil and we saw petrol prices rise locally, the global fuel industry is at an absolute critical stage.
  • Economic Releases - as monitoring of the health of the global economy continues with close attention from so many, some more interesting developments and economic releases came our way during this last week.

And to begin the week, we saw the Rand tracking around R15.60 to the Dollar, looking to make further inroads.

With the current uncertainty and things never quite too certain, anything was possible from the 5 days ahead.

Economists pointed to higher commodity prices coupled with buoyant bond yields that have been spurring on the local unit, and if risk sentiment could just improve, maybe the Rand could go further, but on the other side of the coin, we have tighter monetary policies, high food and fuel prices, and the uncertainty of the ongoing war in Ukraine - indicating that the conditions are likely to become less supportive for the Rand.

So as always with the local unit, we were left waiting and watching for global triggers for what would come next.

And right out of the gate, we saw the Rand actually lose some ground, breaking up toward R15.70 by Wednesday.

It was a rough week in terms of local news, with the announcement coming on Wednesday that Comair was shutting down all flights - out of money, and therefore out of business, at least, for now.

Comair operates as a BA franchisee, and also operates the lower cost airline Kulula, and this kind of news is further devastation for the airline industry in SA following the pandemic and shutdowns.

Where to from here one can not be too sure, but it would seem some investment is being worked out and funding is in the process of being secured, which would give the go ahead for normal operations to resume, but with SAA crumbling, and now Comair fumbling for cash, it isn't a great look for the whole industry.

And then there was KZN and the mounting crises. The unprecedented flooding has left the province in disarray, and what you can physically see is only half the story, as the financial impact for families, businesses, insurance companies and the government will be felt for years to come.

Some of the photos of the destruction are staggering, and it is tough to even try estimate how long it will take to recover from flooding like this (more on that from Fin24 over here)...

And then getting back to the Rand, Wednesday actually marked the turning point for the local unit as we tracked back stronger again over the coming days!

USD/ZAR Chart


And then in other news:

  • It seems we are running from one negative headline to the next, but sometimes it goes like that - and the next big one from the week was the skyrocketing fuel prices, with Petrol going up by more than R2.30!

Inland prices are now sitting at over R24/litre, and more than R9 higher than they were just 17 months ago, in January of 2021. This follows a torrid month of oil prices, exchange rates and now the EU putting partial bans on Russian oil doesn't look like it will help the overall price of fuel.

  • And then as always there were economic releases of interest with the US Nonfarm Payrolls coming through showing that businesses were still hiring flat out in the summer months of the US season, with 390,000 new hires, well above the 328k estimate. Unemployment rate just held steady at 3.6%, but it was an interesting one to digest - while on the same day, Tesla (NASDAQ: TSLA ) announced a 10% headcount cut of salaried workers. Markets were a little shaky, and the Dow lost some ground following the news.

But getting back to the Rand, the end of the week was a good one as we saw further gains into Thursday and a solid finish on Friday.

Friday's trade took us as far as R15.37 before we saw the market make a return to end closer to R15.50 to the Dollar.

It had been a week of consolidation, building and stability for the Rand, but how long can it last?

The Week Ahead (6-10 June 2022)

We head into this next week with that forefront in our minds, awaiting some breakout over the coming days.

Looking at the week ahead, there are some of the triggers that we are looking at for potential market movers:

But, of course, there is plenty else going on globally to provide triggers. And then, as we have seen from last week, sometimes there are none, yet the market moves!

While many will be trying to decipher from all these news events where the markets are expected to head, we will instead be filtering out all the noise by simply watching what our Elliott Wave-based forecasting system is telling us.

As we mentioned last week, this is not the time to be flying blind, going by gut feel, or just hoping for the best.

When it comes to managing your forex exposures or protecting your hard-earned capital, you need an objective system that gives you the information you need to make informed and educated decisions, that enable you to take the right action -- at the right time.

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