With just 2 months left in the year, the Rand is as choppy as ever...

This week saw swinging momentum from highs to lows in quick succession. It is tough for importers, exporters, investors and traders alike to try and manage exposures in such volatility.

But the roller-coaster keeps going - and it is a case of keeping up.

The range for the week was big, but it was far from one direction only from the market.

Overall, the Rand came out on tops, despite so many difficult local events!

Let's dive in to the finer details, and get some idea on where we are going in the next 5 days...

Some big moments dropped in the week -

  • Another firing - Tom Moyane was in the firing line this last week, as Ramaphosa took action against him for his refusal to "meaningfully participate" in the Commmission's processes, as well as other reports of SARS' current state.
  • SA's unemployment - the negative trend continued, as Stats SA released updated info with the official rate moving closer to 30%.
  • Gigaba in a sticky situation - the next high ranking original Zuma appointment was also in the firing line, as the Public Protector took aim...
  • Budget aftershock - the ripple effects continued to take place, as the mid-term mini budget was slowly digested by analysts and business owners
  • Gupta influence - it spread far wider than anyone ever realized, as more and more names got added to the list of those who personally met with Gupta family members...


What a week it was!

These daily range's give some idea -

Monday: 30c
Tuesday: 20c
Wednesday: 25c
Thursday: 42c
Friday: 23c

The ding-dong, tit-for-tat nature of the week left quite a chart to look at by the end of the 5 days!

It was hard to believe, looking at the week of events, that the Rand had managed to pull off such a 'Houdini' escape!

Considering that many were still in shock from the stark outlook in the mini-budget, it made the feat even more impressive.

On that note, the fiscal commission gave 5 points for consideration on the back of the budget:

  • Public Wage bill - these account for over 50% of the provincial budgets. A higher wage agreement was reached in June, but the government does not have income to allocate to this.
  • Local government - a number of dysfunctional municipalities need to be reviewed, and rectified that service delivery and governance can return to normal.
  • Infrastructure - the plan of R855bn to be spent on infrastructure over the medium term needs to be closely monitored and correctly allocated across the different spheres of government.
  • State-owned companies - in short...they are a disaster and a huge liability for the government. Something needs to change!
  • Higher education and training - clarification of the plan for fee-free higher education is a must

A tall order...

...but some very constructive advice, even if some of it is a little sugar-coated.

And the other event to overcome for the Rand was the update on SA's unemployment situation, as the unemployment percentage increased to 27.5%, continuing its trend in the wrong direction.

This is not the news Ramaphosa wanted, just after having concluded the jobs summit - sure, it is perhaps too soon for any results of discussions at the summit to be seen, but there definitely could have been a better start to the jobs drive than this!

Despite that, the Rand flew onwards, cruising to touch a low of R14.36/$ on Thursday!

This was on the back of some excellent work from President Ramaphosa, as he fired the head of SARS, Moyane, following his trouble making stint as the chief of the organization. By all reports, he has driven SARS into the ground, with reckless mismanagement, as well as the other points based on which the President fired him.

This was definitely an anti-corruption powerplay from Ramaphosa, and a good one at that!

There were plenty of other talking points for the week:

  • MoneyWeb did an interesting piece on the US elections and their effect on your investment portfolio. The US Mid-term elections are coming up on the 6th of November, and there are a number of different scenarios which can work out from here. What is expected for investors is that a Democrat victory would likely result in a weaker Dollar - which is great for the Rand, but tough on foreign investors - and also those who export! Overall, an interesting piece, even if it is a very economistic point of view
  • Gupta influence continues to unravel through different investigations, and the there were more high profile names implicated - this time it was Trade and Industry Minister, Mr. Rob Davies, who admitted to meeting with the Guptas. However, that was not the whole story, as he says that many other South African politicians did this, including Helen Zille! The Gupta story is far from done...
  • And then it was the next South African Politician - Malusi Gigaba, who has been labeled as a Zuma-cronie from the day he was appointed as Finance Minister. He is now in hot water over violating the Ethics act, as per the Public Protector, who alleges that Gigaba lied under oath! He has given Ramaphosa just 14 days to act on Gigaba, and this could be another big decision should the President choose to remove him - it would be the next step in undoing the damage Zuma did during his tenure as President, in terms of corruption.
  • Petrol price is an ever present talking point, and finally we see some good news on the horizon - at least, for petrol users, not diesel. The AA is expecting a petrol price drop as we head into November, but is also expecting a diesel price increase. This will be a small decrease of about 16 cents, but it is one step in the right direction, which is good news for motorists! -
  • On Friday, the US Jobs continued to impress, breaking some incredible records as there were 250,000 new jobs added, and unemployment hit a 49 year low of 3.7% - some quite astounding numbers! Whether it is down to President Trump's actions or not, he certainly is flying high when it comes to the USA economy, despite some debatable decisions on tariffs and trade wars!

And one would have expected this to have a very negative effect on the Rand...

...but it didn't.

Friday was another stronger day for the Rand, with the market hitting a best level of 14.22 before weakening slightly to end the week around R14.31/$...

The Week Ahead (5-9 November 2018)

After losing some ground in initial trade, the Rand has pushed its advantage further pushing below R14.20/$.

So where to for this week? We have several economic events which could provide triggers for moves, the big one being US interest rates.

But as we saw from the Non-Farm Payrolls on Friday, the market doesn't always react the way conventional wisdom would dictate.

In fact, it hardly ever does.

That is because the market is not moved by rational forces, but predictably irrational persons making emotionally-charged decisions - that tend to drive the market from one extreme of sentiment to another. And this happens in patterns that repeat themselves over time ... in varying degrees.

The best way to get an idea of where the market is headed is to understand what pattern of sentiment is currently in play and how such patterns played out historically.

This is what the Elliott Wave Principle provides, which we use together with a combination of price-ratio analysis, momentum and time-cycle studies to give clients the most likely outcome for the next few days, weeks, months and years ahead.

To see how this could benefit you, simply give our 14 Day Free Trial a shot.

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To your success~

James Paynter

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