Welcome to our Weekly Rand Review for 29 August 2016, where we take a look at how things unfolded last week and give you our thoughts for the week ahead.
A miserable week for the Rand, as political interference and Hawks charges crashed the Rand to a monthly low, and definitely the worst week since Nenegate back in December, as spikes took the Rand over R14/$. When markets moved above R14.40/$ first thing this morning, all positive sentiment had definitely vanished...
What can possibly be coming next, as Zuma and his cronies seem hell-bent on crippling the economy in South Africa? Scandal, corruption, accusations and persecutions marked this past week... Let us take a look at how it all happened.
Our outlook last Monday morning (see below - click to enlarge) showed the market at R13.59/$, and that the Rand was expected to be topping out shortly, after moving into the R13.60-13.90 area.
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The market did steadily move above the 13.60 mark on Monday, and then began to strengthen again, validating the first half of our forecast.
The markets were fairly calm throughout the day, and the Rand continued on its merry way until it was below R13.45/$ on Tuesday evening.
And then the tables turned. Fast. Very fast.
News broke of Finance minister Pravin Gordhan being summoned by the Hawks investigation unit... This was not good news, as he was supposedly clear of the SARS probe that was launched, and now it seems he is not.
And the result was a panicked rush for the door that we have not seen for a long time, as the Rand spiked 50c in a matter of hours!
As we mentioned in our email last week, there were other sagas running alongside this one, and they all combined to turn the market sentiment on its head.
Such drastic movement on Tuesday evening forced us into an early forecast on Wednesday morning, as we needed to keep our subscribers up to date on what was happening.
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The wave count had changed... And long term targets had as well. Knowing these forecasts would be critical to anyone who has a Forex Exposure.
Early market movement on Wednesday had seen the Rand touch a low of R13.88/$ before open of business for the day. By the time we did our forecast, it was at R14.09. After hours on Wednesday evening, it touched a high of 14.27/$.
These were the worst rates we have seen for a whole month - and it was clear that this nonsensical political nonsense had had a significant effect.
The markets were simmering throughout Thursday, as Pravin spoke to the public and said he was most certainly not going to meet the Hawks, as his lawyers advised him that he is under no obligation to do so.
The markets began to bubble more furiously throughout the afternoon, as the day range extended from R13.88 - R14.32...
More news came out in the evening on Thursday that more officials have been summoned to Hawks for warning statements. Things are at a critical point right now, as the country appears to be at war with itself.
GBPZAR Hits Medium Term Target
Despite all bad news from the past week, there was a positive outcome as one of our longer term forecast goals has been validated perfectly.
The GBPZAR Medium Term Forecast from the 4th of August (see below - click to enlarge), showed us that we were due to go down before bottoming in the 18.00-15.90 areas, with key support at 17.0405.
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It duly did so, as the Pound bottomed out at 17.05 - almost exactly our quoted figure!
This could certainly have saved anyone with GBP exposure some big cash, and I trust those of you who do get our Pound forecasts, used them to your maximum advantage.
Our view on: Ongoing Political Feuds in SA
Although we do not get too deep into these political matters, it is clear to be seen that those attempting to get Gordhan out of his position are only seeking it for their own benefit.
He is preventing them from doing what they want to do with funds in relation to SAA and other entities. Alongside that, he is not giving in to the Gupta's, who are quite possibly the most influential non-political figures in SA right now.
The charges against him are fabricated, and are just an attempt to dig up any dirt they can to eliminate him. It is critical that he remains finance minister for the sake of the economy in SA...
The Week Ahead (29-2 Aug/Sept 2016)
Things are far from settled as we head into this week. The markets appear wide open, waiting for some stability and calmness in the political side of SA, before any stable movement will begin.
Downgrade to junk status is certainly on the cards again if Pravin Gordhan is incorrectly charged and removed from office.
Mixed emotions, opinions and assumptions are spread across SA, as every one with any forex exposure feels unsafe, as the idiotic and self-serving political maneuvering for continues to scupper market confidence.
On top of all the calamities which are unfolding, there are a few big economic events due this week, and we will have to keep a close eye on these...
So, prepare yourself for a bumpy ride... This next week is going to be a crucial one, and gut feel is not going to get you through unscathed.
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As always, I would love to hear your comments and feedback - please leave a comment below.
To your success~