Welcome to our Weekly Rand Review for 1 August 2016, where we take a look at how things unfolded last week and give you our thoughts for the week ahead.
What a critical week this past one was...!
The Rand survived some big economic events, and then broke some extremely important levels, giving us some real important indication of the future. In case you missed any of it, lets take a look at how it all happened...
How It Happened (25-29 July 2016) |
The previous week had seen the Rand ending the week in the "lukewarm" 14.30-14.40 area, having twice bounced off support around 14.1600.
Monday began with the Rand sitting at 14.30, with the big event for the week being US Fed rate announcement on Wednesday, and then local Trade Balance on Friday.
Our updated outlook still showed that some near term weakness against the Dollar was expected (before the larger degree downtrend continued), but a break below 14.1610 invalidating this outlook (see below)
Click to enlargeMonday was extremely choppy, and the Rand basically achieved nor lost anything for the course of the day. Until it came to late afternoon/early evening, when it bounced to punch above 14.40. This was what we had been expecting, just with a slightly delayed reaction.
Some extremely sharp movement greeted us on Tuesday morning. No sooner had we started our laptops and got to work, the Rand had strengthened over 10c, bringing it back to 14.25/$.
But, once it touched that figure, it was up and on its way again!
Early afternoon saw the Rand hit its worst levels since the Turkish Coup d'etat attempt which saw the Rand hit 14.60. The high on Tuesday was 14.46, which gave a days range of well over 20c.
...however, after business hours, the Rand was back to 14.32/$, as jumpy movement just did not stop.
Rand's consistency vs US Dollar |
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In recent weeks we have really seem some of the most consistency in the Rand in quite some time. Examining the image alongside, we will see since the beginning of June (start of the chart), we have seen no less than 7 sharp moves from the Rand.
The patch we were now in (circled), had been some of the least volatile in some time, apart from the Turkey Coup d'etat attempt. |
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The big day dawned... Wednesday. Fed rate announcement day.
All were in anticipation of the reaction of the decision, and also what movement there would be in the build up to the decision.
The initial movement was good, as the Rand strengthened slightly as the day went on. The announcement was due after hours, at 20h00, so the after-effects would only really be seen on Thursday morning.
Instead, as it happened, the Rand was quite vicious in its after hours movement, in the build up to the Fed Rate announcement. Initially pushed up into the 14.40 area before falling down to 14.20 once again, late on Wednesday night, after the US Fed said it was not going to hike its fed funds target range.
Once again, what we see here is a big event having some short term effect on the Rand, but nothing long lasting, as the general trend resumes.
Thursday's Short Term Outlook (see below), showed that the Rand's failure to rise to the level anticipated in Monday's update had increased the chance of a break lower to 60% with a breakout of the range being critical to direction.
Early movement on Thursday took the Rand down under R14.20/$ as it strengthened all the way to 14.16459... This was now right on the edge of validating our forecast...
...And it bounced back up again.
Close but no cigar is the saying which comes to mind!
The rest of the day was fairly uneventful, as the Rand slowly meandered to a close of business level of the mid 14.20s... in the center of the two paths, but after business hours, it strengthened to a level of 14.0788
This was the strongest we had seen the Rand since December 2015.
But more importantly, the break below the 29 April 2016 low of 14.1176 confirmed our longer term forecast was firmly in place.
We revealed to our subscribers just how important this is, in terms of a long term outlook for the Rand. Thursday's strengthening was absolutely critical. The pathway for the Rand had now become even clearer to us...and our subscribers.
Friday was a slow day, as we saw the Rand retrace slightly, but definitely all eyes were already moving to next week. These are possibly the biggest elections since 1994, with emotions and tension set to run at high levels...
However, there was one big event left for the week. The Balance of Trade firing off at 14h00.
...And did it fire off! Within no time, the Rand had broken through 14.15....
And 14.10...
And the mental barrier of 14.00...
AND 13.90...
Until it touched a low of 13.82!
A fantastic way to round off an excellent week from the Rand. There will definitely be some positivity on Monday morning, but we await to see what the week will bring...
The Week Ahead (1-5 August 2016) |
All eyes are on the Municipal elections which will occur on Wednesday, 3rd of August. We can expect some serious volatility surrounding the results coming out. We also have some important financial releases this week, so expect a very bumpy ride.
While we cannot predict people's reactions to the DA/ANC gaining power in certain provinces, we do know that the Elliott Wave Principle can be used regardless of major political/economic events, and have learnt that that the patterns tend to play out irrespective of what events are unfolding.
For this reason, we expect the forecast we published this morning to hold steady.
For those of you who are not subscribed to our forecasts already, if you have any Forex involvement you need to have a game plan. Otherwise you are taking pot shots in the dark. If you have not already, get subscribed to our free trial today, to see what a difference and saving we can make.
As always, I would love to hear your comments and feedback - please leave a comment below.
To your success~
James Paynter
