The Rand is fighting the tide...(and winning!)

What a week for the Rand, as the local currency made its best one week gain in 18 months!

Who would have thought a month back that the Rand would be at these kind of levels ... let alone make its strongest move in the hyped lead-up to the ANC Conference?!

Well, for those of you following our forecast, you will know we have been punting this big move all along (even if there is no rational reason for it politically, economically or socially)...and that's why we trust the charts, not the news!

The week had some big moments and events, culminating in the ANC Conference ... and there was plenty opportunity for the market to react ...and it didn't disappoint...

How It Happened (11-15 Dec 2017)

Late the previous week, we had seen the market lose quite a bit of ground, touching over R13.70/$...this was supposedly due to US Job numbers, and pre ANC Conference jitters...

With the elective conference due to take place 16-20 December, with the spotlight on the Ramaphosa vs Dlamini-Zuma race, many were saying "it is too close to call, so expect the markets to trade sideways"

But our analysis on Friday prior was showing something entirely different. With the market sitting around 13.65, the charts were indicating a very Rand-positive week, with substantial gains for the local currency.

USDZAR_STU Click to enlarge

Very surprising considering the many worries, fears and risks, but that is what the charts patterns were saying (and we have learnt to trust them).

We know, this does not make logical sense, as many asked us "how could the market be expected to strengthen in such a volatile climate just before the ANC conference?"

Good question.

But one that we do not answer like others do -

We don't look for reasons why...we just go by the chart patterns themselves.

And the charts which were telling us that the market about to reverse and fall sharply down below R13.33...

...it was going to be an interesting week!

Some key takeaways for the week leading up to the Conference:

  • Zuma gets his dues - at least, for some of the outstanding matters against his name as the High Court gave a stinging decision on Wednesday, with instructions for the President surrounding #StateCapture...
  • Steinhoff hits junk as R300bn in value is lost - the battered company crumbled further with losses on all sides...they were in dire need of an exit plan and were really struggling to come up with one. However, some persons have seen the opportunity, and are buying shares.
  • US Fed raises rates - an increase as expected from the Fed was one of the talking points of the week
  • SARB Quarterly Bulletin - all eyes on the Current Account deficit
  • Rand gains handsomely - the local currency comes out tops...

Monday saw the USDZAR pretty much track sideways - after touching a low of R13.56, it rebounded to end the day almost on level pegging.

(For those who are trading or investing in Cryptocurrency, possible bad news - SARS is coming after you - but I don't know how they are ever going to get it right! 🙂

As many persons counted down the days to the ANC Conference, the view was that a Dlamini-Zuma victory could be disaster for the economy. It would be like the final nail into any hope of turning things around into 2018.

Even Fitch had their say on SA Confidence if Dlamini-Zuma were to win...

And on Tuesday, pre-conference jitters were said to get the better of the the local currency - throughout the afternoon and evening, we saw the ZAR climb fast! As it spiked over R13.72, our invalidation level was in danger...

...however, as expected, it pulled back overnight, and continued to do so throughout Wednesday.

If we consider the Rand to be volatile, spare a thought for Steinhoff investors - they have lost almost R300bn after the company hit 'Junk status' following the scandal around their accounting irregularities a few days back...

Wednesday was a big day with US Interest Rate decisions due - and the Rand delivered handsomely!



This was after President Zuma was put into quite a spot by the Gauteng High Court, which found him:

  • Liable for personal costs of his legal challenge
  • Needing to fulfill the remedial actions of the former Public Protector's State of Capture report
  • Forced to institute a commission of inquiry within 30 days, into the matter of State Capture
Many came out in support of the High Court, such as civil rights body OUTA and Former Public Protector Madonsela

So, a win for the justice system, and this together with disappointing US inflation and the hiked rates from the Fed seemed to be a strange mix for the Rand to pull out the stops...

From a high of 13.66, it made a low of R13.42 to the greenback late on Wednesday before retracing to R13.47/$ - it seemed as if many were prepared to take the risk, even with the ANC elections still undecided (high risk, high reward...?)

And with that, it was time for Wednesday evening update to our forecast.

And the surprising result was a lowering of the target area from the original R13.33 to a revised range of R13.24 to R13.08...

...phew, another crazy, bold call?!

What on earth would cause this? Frankly, we neither knew nor cared.

USDZAR_STU Click to enlarge

And then, Thursday,which was packed with high impact local and international events, with all of the following ones on our Rand Fundamentals & Data Releases table for our premium subscribers:

And the first half of the week followed very closely on our expectations, as the Rand strengthened handsomely - put down largely by economists to the "Ramaphosa effect" (we don't know what caused it - all we know is that sentiment was going to drive it there irrespective).

Some key events in the week:



As a result, many were expecting a rather volatile day - but it did not turn out too badly.

The USDZAR traded in the R13.52-13.38 range, and while it was a tad choppy, it managed to hold well, ending around R13.45 at the US close for the day.

The end of the day meant we were just 1 day from the big one for the whole month, maybe even the whole year - the start of the ANC Elective Conference. With polls saying it was too close to call, many believed the outcome was going to be crucial to the economy, political stability, and SA's Credit Rating.

However, some analysts are saying Rating Agencies will not act based on ANC Leadership Race...

And then it was Friday - what more did the Rand have in store?

And to cut to chase - it had an awesome day for Saffers!

Opening the day at 13.51, it was one way traffic all day, as the market pushed well into our the target area to finish the week at a phenomenal R13.09/$.

And that was that...the 3rd last week of the year came to a close - and the best for the Rand for a long, long time. Despite all worries surrounding the currency, it had come up trumps...

...for this week at least!

The Week Ahead (18-22 Dec 2017)

The Rand has started the new week with a bang, pushing through the R13.00 barrier with ease, even as news is still awaited from the ANC Conference...

Many are asking what the effect will be on the Rand if Ramaphosa wins, and what will happen to the local currency if he doesn't?

Firstly, to reiterate, as we have seen from predictions prior to important votes, they are seldom accurate. Think #Brexit, think Trump. Don't bank on a Ramaphosa win just yet, especially with all that goes along with African politics..

But, as always in these situations, it is impossible to tell market direction from events -

...the market will move where sentiment takes it, and the only dependable way to get some direction is to look at what the sentiment patterns are telling us themselves where the market will head...before the move happens...

...we will leave the economists to hatch up some backward-looking reasons for the moves once they have happened.

So...do you want to cut through all the noise and hype and get a dependable weather forecast for the Rand for the next few days, weeks and months ahead?

Simply hit the button below - and get on the inside track now....

Start Your Free Trial Today


Look forward to helping succeed~

Kind regards,
James Paynter

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