Rand dips below R14/$...as predicted

An interesting week for the Rand saw a bit of calm descend on the markets, as we traded in a narrower range from Monday through to late Thursday...

...an unusual calm for the Rand, that was for sure, as it edged lower into the target areas per our predictions the previous week!

Then Friday brought some fireworks, with Non-Farm Payrolls release kindly providing the trigger for our anticipated reversal.

There was more than enough in the week to discuss, so let's get into the full review, so that you can see how you could have seen this week's movements coming before they even began!

The week began with our short term forecast being issued late on Friday the 28th June for the Rand vs Dollar, Euro and Pound (see USDZAR forecast below).

For the USDZAR (see forecast below, click to enlarge), the prediction was for the market to move a little lower, into the 14.06-13.83 target area before we would see it bottoming out and heading higher toward R14.20 and above...

USDZAR_STU Click to enlarge

What a prospect!

It actually looked as if R14/$ was a possibility...

...who would have guessed just 3 weeks ago that this would be possible (except those on the inside track, of couse)?

It was sure going to be another interesting week.

And it was a week with plenty more big headlines, such as:

  • Trade War Truce - how long it will last is the question, but Trump and Xi walking back some of the last few months' aggression was much needed...!
  • Zimbabwe slips further - the general chaos has continued the other side of the border, with huge inflation and general supply shortages plaguing the nation
  • Eskom situation worsens - more funding, more lack of action to resolve the situation...
  • Global Economic events - enough events on this front to keep the markets on their toes!
And it was Monday that began with the news from the G-20 Summit in Osaka. President Trump took to twitter to announce a trade truce between the US and China. He announced that current tariffs will remain in place, but will not increase to allow negotiations to continue...

...he then also eased restrictions on Huawei to allow the Chinese tech firm to purchase US products.

A very interesting change of tune - and it now begs the question around whether Trump actually blacklisted Huawei for security reasons and spying, or as a Trade War move?

Either way, the markets overall saw this as a positive, but with little to no reaction...strange, one would think, considering the level of importance economists place on the Trade War?

​Proving once again...trust the wave count, and not the headlines!​

The USDZAR remained resilient, slowly tracking its way down to close around R14.04 by Wednesday, which meant it was time to update our forecast...

And this update (see below) confirmed that the market was primed for a reversal, although it could test below 14.00 briefly before doing so...

..and then a move up was anticipated, taking us above 14.2130.

USDZAR_STU Click to enlarge

And, on Thursday, as the US took the day off to enjoy Independence Day, the Rand took the opportunity yo push its way briefly down to hit R13.95, before reversing back above R14/$....

...exactly as per our prediction from earlier in the week, and in so doing, it had also confirming some of our larger degree wave counts.

Many said we would never see under R14/$ again, but here we were - contrary to economics and politics, global growth concerns and Trade Wars!

And with that done, all it needed was some trigger to push the market higher and confirm the reversal that we had predicted...

And that was what Non-Farm Payrolls kindly provided on Friday, as the US jobs came in at 224k, as opposed to the expected 160k. Strangely enough, unemployment rate ticked up to 3.7%, but that was not enough to stop it being a trigger for the Rand weakening as per our predictions:


So, the Elliott Wave Principle had called it again!

Very, very satisfying to see...

In other news:

  • Economic figures rolled in: Chinese manufacturing figures released this morning slowed in the month of June, highlighting further concern for global growth. SA vehicle sales contracted by 1.6% year-on-year in June. ADP employment change (unofficial job numbers) came in lower expected yesterday.

  • More worms came out of the woodwork from Eskom, as it was announced that there was a R17bn emergency funding authorized by the Treasury in April. This was the maximum amount allowed for emergency funding, otherwise who knows what the total figure would have been!

    There have been calls for Quantitative Easing by some to assist Eskom, but deputy Finance Minister Masondo put those ideas to bed with his comments that “I don’t believe that something like quantitative easing will be able to help Eskom as the situation between South Africa and other countries is totally different. Countries that have used quantitative easing had zero percent interest rates and that is not the situation here."

    As per Fin24's article, Time's up for Eskom. There needs to be action, and fast, with the separating of Eskom into the different entities and a clear plan on how to drag the SOE out of the deep debt which is piling up.

  • The US has threatened to enforce new tariffs on an additional 4bn worth of European goods, after already imposing tariffs on 21bn worth of goods announced in April. Investors remain wary, as Trump seems unlikely to reel in his trade disputes with quite a few countries. The other side of the coin is that Trump is on the campaign trail now for 2020, and it would not be surprising to many if he drags this Trade War out until mid-late 2020, in order to use it as a marketing play for his 2020 bid for presidency, by completing it just in time for the election.

As for the Rand, it closed out the week around R14.17 to the Dollar, recovering slightly after hitting R14.27...

...it had been interesting week, one nicely telegraphed by our forecast from Friday.

The Week Ahead (8-12 July 2019)

Well, after an eventful week last week, what does this week hold in store?

There is not much from a economic data releases point of view, the main local ones being Manufacturing & Mining and speech by Fed Chair Powell as well as release of FOMC minutes.

But that doesn't mean that the markets won't have direction...

As we have shown the past couple of weeks, by simply analyzing the sentiment patterns together with our unique combination of momentum, time and price-relationship studies, we were able to anticipate:

  • Which way the market was trending...
  • How far the market was likely to move in that direction...
  • When the market was primed for a reversal...
  • What the market was expected to do thereafter...
  • 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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