A quiet week in the markets saw the Rand range-bound for the course of the 5 days, with all eyes waiting on trade news from US & China.

Then there was also local matters at hand with the SAA debacle...

...but overall the Rand seemed undecided, with a relatively small range for the week.

Toward the end of the week we had some bigger economic events which many were waiting to see the effect on the ZAR.

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

The week began with our forecast on Friday the 15th, giving the outlook for the days ahead. It was rather a complex outlook, with the expected trend being for the market to bottom out in the 14.68-14.58 area, then heading higher to 14.79-14.88, then followed by a bias for heading lower again towards 14.5133...

It was going to be an interesting week, that was for sure, if these moves indeed played out...

As we headed into the week, all eyes were on the following big events:

  • Trade War - of course...what else was going to be No.1 on the list, as we awaited news of the deal between the US and China?
  • SAA strikes - the unions continued to push hard over the weekend, crippling the airline's operations
  • Inflation & Interest - two big local events toward the end of the week that many had been waiting on
  • Impeachment hearings - the moment of truth (supposedly) as to how likely Trump's impeachment is...
  • Eskom - any updates on the debt-riddled SOE that show light at the end of the tunnel would be good news!

The Rand opened with these headlines still hanging in there air, around the R14.70 mark...

It had been a very good Thursday/Friday to close out the week, the momentum was certainly with the ZAR - however, from the outset, the Rand was on the weakening trend.

Before the day was out, we saw the market testing R14.80 and above...

...only to reverse this on Tuesday (right as per our forecast)!

But the moves were small by comparison, and that was really the order of the week, as the Rand continued range-trading in a narrowing band. .

The Trade War hung like a thick mist over global markets. Everyone was expectant of some news of the deal, and all that seemed to happen was the mist kept hanging - no clarity, and no reason to believe there will be any soon...

...and that gives investors the jitters.

And then it was the US who pulled the first punch Wednesday, in a seemingly unrelated bill - but it had everything to do with this Trade War, which is really a US-China spat, with Trade being the playing field.

The US voted in a bill to support the pro-democracy Hong Kong protesters through Congress, which was unanimously voted in.

China (read the Communist Party of China) did not like this... and they hit back by issuing a warning of retaliation against the US, further complicating trade talks.

Expectations are for this to drag into 2020 before definite deal comes out into the open...the good news being that Goldman Sachs says the drag on the economy in 2020 will not be as bad as this year...

...and so we wait!

As for the Rand, it continued its choppy trend, trading back up to R14.86 on Wednesday, before breaking lower on Thursday afternoon to touch R14.64:

This was exactly as per our forecasts...another win for the Elliott Wave Principle...

In other news:

  • While the US news was rumbling on, SA had its own fair share with the SAA strike ongoing. NUMSA was threatening to extend their strike through the week, and the domino effect just continued... Some quotes and headlines during the week told the story:

    "SAA has no money" ~ Jackson Mthembu
    "Close it down and start another airline" ~ Tito Mboweni
    "SAA confirms salary delays for November" ~ Fin24

    And so it continued...NUMSA was not budging, and SAA had no options as it was out of time and money. Gordhan's take was that the Govt was committed to saving SAA, but there's no room for further bailouts. Time for some tough decisions before the whole pack of cards comes down...

  • And it was more trouble back home as S&P seemed set to downgrade SA further in its investment ratings, taking the country from below investment grade with a stable outlook to having a negative outlook. This all seems to be unraveling from the Mid-Term Budget horror show from Mboweni. It is now a countdown to February when Moody's gives their next review...!
  • Then it was time for SA's economic figures on Wednesday and Thursday with the inflation and interest rate coming out. Inflation coming in first made for excellent reading as we saw the CPI for October dropping to its lowest in over 8 years, which left the door open to a rate cut... but SARB did not oblige, holding rates the same as before...
  • And then there was Eskom, who had had no one at the wheel for months now, finally getting a new CEO to take hold of the ship and steer it in the right direction. Apparently the bravest man in South Africa, Andre De Ruyter, has handed in his resignation at Nampak and is set to take charge as the new CEO of Eskom. De Ruyter’s first day at the helm is 15 January 2020, with the SOE’s debt currently standing at R460bn. Good luck to him...he is going to need it!
  • Over in the US, we saw politicians battle it out in the Impeachment Hearings for Donald Trump with both sides clearly already set on what they want. Democrats want to impeach, Republicans are calling it a witch hunt. And so we wait to see what is really going to happen...

On the back of all these potential trigger events, over Wednesday & Thursday we saw the Rand strengthen against the Dollar to once again test the lower R14.60s...

...before the momentum failed and we pushed higher to R14.70 odd to close out Thursday.

And then, Friday saw another test of the 14.60 level fail, with the market closed back around out around 14.70...pretty much where it had started on Monday!

And that was the wrap!

The Week Ahead (25-29 Nov 2019)

Well, it has been an interesting month so far, with the market moving in a narrowing band, and last week seeing the Rand ending the week where it had started it.

But do not expect it to stay that way - a breakout is expected imminently...

...and all it needs is a trigger, which can come through some economic news event (of which there several medium impact ones), but it may be a political, social or financial trigger.

And sometimes, it needs no 'known' trigger event at all...

As we said last week, we are approaching some important inflexion points in our Elliott Wave-based analysis, which should provide some clarity on the two potential scenarios playing out - and we will be watching some key levels closely to confirm direction in the coming weeks.

To get a look at what we are speaking about, use the link below to get access to our forecasts for the next 14 days.

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(You don't want to regret not having done so this time next week...)

Look forward to hearing from you.

To your success~

James Paynter

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