While it has felt feels like the tide is dragging a seemingly helpless ZAR out to sea...
...the market just keeps on fighting back!
With no rationall explanation, the Rand strengthened nearly 50c in less than 2 days. Why?
Economists bumbled around for answers...while secretly thinking: "How could this be? What is happening?"
It was just another example of what we said again last week:
Economic events are the trigger. Sentiment is the direction giver.
Sounds simple...but unfortunately it isn't - and it catches most persons time and again
Lets read on, and see how the seemingly impossible happened once again...
Friday's forecast put the Rand in a tough spot at 13.3826 where it was expected to strengthen briefly before bottoming out and heading much higher, into the R13.60s...
The market opened at R13.35/$ and was rather jumpy for the first part of the day.
However, following our forecast exactly it moved its way down to 13.29 by just after 11am, keeping just within our invalidation level.
Now was the moment when expected the tables to turn...
...if this went any further, the forecast would be invalidated.
But that was exactly where the market did turn, and quickly its gains of the day were lost, as it rushed from R13.27 to over R13.50 by the close of the day!
It was clear the market had not yet recovered from the SARB nationalization talks, and also the strong US Job Numbers.
But for now, the Rand was left whimpering and limping away from the battlefield, opening Tuesday just a touch under R13.50...
Tuesday at least had some good news... SARB's independence seems to be safe (for the time being) as the public protector banked down on initial proposals of changing its mandate.
As a result, investors have returned to local bonds, which hopefully would bring some good news into the local currency...
...but that was not quite how things worked out.
The Rand kept rushing onwards throughout Tuesday morning, and in no time was trading over R13.60/$! Wow...
How things can change so quickly - a full 35c swing from where we had seen it just 24 hours before. Now, with the Rand having made a high of R13.627, where were we headed from here?
As expected, we got some consolidation initially on Tuesday. By the time the day closed, the market was a bit more stable while trading a touch over R13.50.
Now for Wednesday...
Despite good news on the political front and foreign investors returning to local shores, the rand has lost around 8% against other emerging market currencies over the past month (2-3% this week alone)
However, it seemed this time, the Rand had a few tricks up its sleeve for us...
With the market trading around R13.52 at the start of the business day, things quickly changed...
In leaps and bounds, the market just plummeted!
While it may not sound like a lot, was gained, for the Rand to be under R13.30 before the close of the day was some achievement!
With all negativity (we will admit, there was some positive news which was a small shining candle), the Rand seemed to have turned it around against the tide!
It was quite amazing stuff, and before we had released our forecast, a low for the day had been made: R13.22!
Now, moving on to Wednesday's forecast - with the market trading at R13.2378, the expected target area was for it to push perhaps a little lower before bottoming out, and moving higher...but 13.1350 would be critical to this preferred wave count playing out...
It felt as if some positivity returned on Thursday, after the Rand had rebounded all of 2.5%... Janet Yellen the Fed Chair, had painted rather a gloomy perception of the US economy on Wednesday, which some persons put down to the Rand's gains...
This is in contrast to President Trump who is touting the enormous gains in jobs since January:
And the record highs of the Dow and other stock markets:
But onwards to Thursday...
Initially we saw the market move in line with our forecast, pushing lower to test R13.15 before finding some resistance there.
The Rand had begun the day just below R13.25, and had steadily pushed its way down.
After finding that resistance, it regained some ground, and was trading over R13.25 at SA business close...
All of a sudden, we were down to the last day of the week.
And what a day it turned out to be!
With not a huge amount of economic data due, the Rand Held pretty steady throughout the morning period.
By mid afternoon, it only had a range of around 6-7c, which was unusual...
...which should have warned everyone that something was just around the corner!
And then KER-POW!!
The news hit.
The Rand was sent below R13/$ in just over an hour!
The news, for once, was good... the Chamber of Mines announced that the Department of Mineral Resources (DMR) has resolved not to implement the charter, pending the results of the court application to interdict the charter.
The Rand took this up well, and its pin-drop to R13/$ levels meant that this week was turned into a really productive one!
In other news, according to Treasury One, the US consumer price index was at 0.1% month-on-month, compared to the 0.2% markets expected. US retail sales fell 0.2% in June.
After a poor start, the Rand had turned it around!
And the week closed off after not too much more action, the Rand sitting comfortably around R13.05/$...
The week ahead looks to have it all set up for fireworks...
After this last week, expectations are high as to what is coming next.
With a comeback of massive proportions on the back of the seeming safety of the SARB Nationalization, and the suspension of the Mining Charter, the Rand has brought back its losses from earlier in the week, and then some.
But this next week certainly has enough happening to keep the interest up.
Events are lined up, and big ones too.
But most importantly of all, the question being asked is this:
Was this just a temporary correction, or part of a larger downward movement from the Rand?
The answer lies in the Elliott Wave Principle - it is not a perfect system, but correct application of it gives the best possible information you can have at any one time.
Add a Comment