Impressive Rand approaches R14/$...

In a flash, we have half the year behind us.

And it has been one of mixed fortunes for the Rand, as we have seen it duck and dive its way through the different hurdles that have been thrown at it in just 6 months...

This week was one of the more calm ones of the whole year!

But let's get into the full review...

Here were some of the main talking points for the week:

  • SOE's take strain - Pravin Gordhan did not bother to beat about the bush in addressing the terrible State Owned Entity situation in SA this week...
  • G20 - the summit of the expected meeting between Trump and Chinese President Xi...all eyes were on the end of the Trade War being reached
  • Zimbabwe - SA's neighbours have made another currency U-turn, and it is probably their most controversial yet
  • Bitcoin explosion - it was that time again, as the long term trend had changed for Bitcoin and cryptocurrencies, and we were right back into the bull market

Our review for the week ahead had started on Friday, with the publication of our latest short term forecast, which showed the market was expected to complete its 4th wave correction before heading lower into the 14.15-13.90 area (see below).

If our analysis proved correct, it would be an interesting week - and another very positive one for the Rand...

USDZAR_STU Click to enlarge

The Rand opened the week steady and positively, but it certainly wasn't a good start on the political front.

Following the SONA last week, the public protector is now investigating the President for donations of R400 million made to his Presidential campaign.

The timing of these allegations (from an unknown source) could not be any worse, with the country and (more importantly), the economy requiring the President’s full attention...

And there was more to weigh on the markets - the sorry state of SOE's, which Pravin Gordhan addressed - and it was not pretty.

As he said, "The situation within our SOE’s require special measures, which shall include greater intervention from the shareholder if the boards and management do not take the steps needed to deliver on the outcomes expected of each company."

He further stated that Eskom has implemented the “winter transmission plan” which has seen staffing gaps being filled and fewer unplanned outages ahead of the cold winter months.

The outcome of these promises is going to be essential to Eskom keeping the lights on.

At the same time, there needs to be clarity coming in around the unbundling of Eskom, with us now 4 months down the line and no clarity even for the workers at the company!

This follows on to the next point, which is why the lights need to be on: following poor 1st quarter growth, news that Multichoice is set to retrench over 2000 employees will surely add more pressure, particularly after Standard Bank closed a number of branches affecting 1200 employees.

The economy needs a boost - and it cannot be done without electricity.

Pravin Gordhan is one of the more stable, level-headed individuals to be heading this up. One would think him over the Eskom situation is good hands in control of what is happening.

...Ramaphosa has the view of "Great improvements at Eskom" and more on the way...this remains to be seen!

But whether these men can save a sinking ship that is overloaded with incompetent fat cats is another question...

With all these negatives, rational logic would say the Rand should have been on the back foot, and losing ground...

...but the opposite occurred.

The Rand not only held steady, but gained handsomely after holding steady - taking it right down below 14.15...

....just as per our forecast on Friday had anticipated!


On the global front, all eyes were on the anticipated G20 Summit meeting between President Trump & Xi - this could be the completion of the Trade War - or the exact opposite.

There was bated breath around the world!

While something official would need to be signed between the two countries, ultimately Trump and Xi call the shots - and a truce between the two would go a long way in solving the debate.

On the global front, all eyes were on the anticipated G20 Summit meeting between President Trump & Xi - this could be the completion of the Trade War - or the exact opposite.

There was bated breath around the world!

While something official would need to be signed between the two countries, ultimately Trump and Xi call the shots - and a truce between the two would go a long way in solving the debate.

In other news, here were some of the headlines:

  • Locally, last weeks’ SONA debate raged on as opposition members grilled the President in yesterday’s parliamentary sitting. The new land appropriation bill was on the braai stand, with the main talking points being finalising the constitutional amendments to section 25, i.e. how to expropriate the land without compensation, and passing the Expropriation Bill.

  • SA Non-farm payrolls data released yesterday showed growth of 0.8% y/y in the 1Q19, which had little to no effect on the local unit. Along with that, the PPI number came out in line with the expected 6.4%.

  • Over across the border, Zimbabwe is in all sorts of trouble. Their currency has been in a shambles over recent months, and this week it took a turn for the worse as President Mnangagwa announced that the Zim Dollar was making a return, and foreign currency of Rand and US Dollar is now not legal tender. Confusion reigns for locals, as inflation of nearly 100% has meant food shortages and general chaos. To add to the mess, electricity is a major problem for the country - so much so that Zimbabwe has now made a payment of 10 million USD across to Eskom, in order to try ease the power shortage.

  • Lastly, Bitcoin's explosion of December 2017 suddenly seemed to be happening all over again before our eyes...an incredible explosion of price over the last few months came to a mini-finale of sorts this last week, as the market skyrocketed to hit almost $14000 on Wednesday! This is going exactly as per our predictions so far, and was very satisfying to see (more on this soon). In true Bitcoin style, we saw the market retrace to just over USD 10,000 just a few hours later on Thursday! Amazing stuff...! As the end of the week approached, with snippets of nothing concrete coming from the G-20 Summit, the Rand merely continued its impressive performance on Friday, gaining further to end the week around R14.07...

Another fine week for the local currency, amidst news that should have done just the opposite! Explain that, economists!

Of course, we didn't need to explain anything - we just looked at where sentiment patterns were expected to take the Rand...

...which is what they did - to a tee!

The Week Ahead (24-28 June 2019)

So where to for the week? Can the Rand continue to outperform?

And what could provide triggers?

This week has two important economic releases which normally provide triggers for big moves:

  • US Trade Balance
  • US Non-farm Payrolls

And of course then, there is all the news to digest on the G-20 summit meetings, and how this will affect markets. Not to mention the local SOE mess and its implications.

But, as we mentioned last week - these events will never give you direction. It will be the underlying sentiment that does.

And again, as we saw last week, we had a picture perfect situation of anticipating where the market was expected to head - before any news hit at all.

This allowed us and our clients to make decisions ahead of time, based on an objective system - not based on gut feel, emotions or rational fundamentals.

It has been very satisfying once again to see the market moving in line with our latest short term wave count, and the latest week's move has also confirmed our preferred larger degree wave counts.

Short term, we underlying sentiment has reached an extreme, so some correction is anticipated in the days ahead...

To get a look at what we are talking about, simply click the link below.

Get Immediate Access Here

I look forward to being of service to you - and to saving you money, time and stress.

As always, appreciate your feedback and thoughts.

To your success~

James

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