Another week on the front foot for the Rand, as the global market took a turn for the worse.
It appeared as if many months of uncertainty with the Trade War were finally taking effect to the point where the Federal Reserve could no longer deny it.
And yet, this was following some strong showing from the US Non-Farm Payrolls.
Which does not really make sense, logically, as SA's market relies on the global economy...
...but let's look into the deeper detail of how it all happened.
Here were some of the biggest headlines from the week:
- Fed Chairman Powell - his testimony was one of the highlights of the week, as we got a little more insight into the Fed's view on the current economic situation
- SA GDP - with Q2 over, it is a countdown to see whether SA has emerged stronger from the horrific Q1 growth reports...
- Deutsche Bank - is the collapse of this monster actually happening?
- Iran - tensions with the US continued to rise following strong sanctions, and it has resulted in nuclear retaliation
The week began with the Rand opening trade around R14.20/$...
On Friday, the US had created 224k jobs in June vs the 160k expected on Friday. The strong data threw the cat amongst the pigeons, as markets now question whether the FOMC have enough evidence to justify an immediate rate cut.
It was going to be an interesting week, with Fed's Powell testifying to Congress likely to give us some insight into where things stand in the global economy.
And Monday came with some warnings as to the global economy. Deutsche Bank announced 18000 job cuts, as they battle to save a sinking ship. They are going to exit the equity business and return to their German roots...
...a radical change, perhaps giving some clues as to the position of the banking industry at a whole. (Roll on the cryptocurrency revolution?)
And Jerome Powell echoed some of economists expectations in his testimony, with emboldened market expectations of an inevitable interest rate cut at the Fed Interest Rate decision, and said that the US Jobs data had not changed their view on cutting interest rates.
So, it would appear that it is time to mark your calendars for this: 30-31 July.
Markets around the world reacted on Wednesday to this news, and after being flat on Monday & Tuesday, we saw a big move on Wednesday take us down to R13.85/$ by Thursday afternoon - the best rate we have seen for the Rand since February!
The news is seen as Emerging Market positive - but don't be fooled.
This was a trigger for the markets to move after a couple of quiet days...
...and beware of the chance of a "Buy the rumour, sell the fact" approach that comes about with these expected economic results! The safest way is to trust the Elliott Wave counts, which are reliable in giving market direction...
The Rand then closed Thursday under R14/$, on top of the Dollar once again!
In other news, here were some of the big headlines:
- SA GDP took an absolute battering in Q1, and with us now at the end of Q2, all eyes are on whether there has been a pullback and recovery. Expectations from Mike Schüssler, an economist, were that we could expect "a massive bounce back for the Sa economy after the disastrous first three months of 2019". This would be great news, as fears of another technical recession are there should this not happen.
- On Wednesday, President Cyril Ramaphosa assured policy continuity by giving the South African Reserve Bank Governor Lesetja Kganyago another five-year stint. He had two new faces to assist him in a deputy and advisor, and hopefully they will keep the SARB ship steady!
- Iran uranium levels have been controlled ever since the Iran Nuclear deal forged by President Obama back in 2015. However, with rising tensions between the US and Iran, Iran has now said that they will be breaking the terms of the deal due to the new economy-crippling US sanctions.
- The importance of this? It means that Iran has now surpassed the critical nuclear enrichment level of the 2015 deal, and are on their way to creating their first nuclear bomb should the trend continue. Not good!
- Zim's power situation has continued to collapse along with the rest of the country, and it now leaves a massive debt situation. A total of 14 million USD minimum is now required per month to sustain the power deficit they are facing. This is seemingly impossible for the debt crippled country, so it looks like more electricity-less pain for Zimbabweans...!
Friday brought some more price action for the Rand as we saw a move back up to R14.04, before the market strengthened after the SA close to end the week back under R14/$...
It had been quite a few days, and while a little jittery, a stronger week for the Rand with 20c gains!
The Week Ahead (15-19 July 2019)
Well, after another eventful week, what does this week hold in store?
The Rand has started the week on a good note, continuing where it left off on Friday week, pushing stronger against the Dollar, Euro and Pound.
Apart from political and global tensions, this week has some potential economic events that could provide triggers be market movers, the most important being US Retail Sales, Fed Chairman Powell's speech and SA Interest decision.
It seems that the Rand has been almost unstoppable the past few weeks, but we know in this market that trends of any degree never continue ad infinitum.
And that is the beauty of analyzing with the Elliott Wave Principle, which is the study of irrational yet predictable human behaviour in financial markets.
Markets are moved by mass human sentiment.
And by analyzing these sentiment patterns together with our unique combination of momentum, time and price-relationship studies, we are able to come up with where this sentiment is likely to take the market - in smaller and larger timeframes.
And in so doing, answer the following questions:
- Which way is market likely trending in different timeframes?
- How far is the market likely to move in that direction?
- When is the market primed for a reversal?
- What is the market expected to do thereafter?
Being able to answer these questions allows you to make decisions ahead of time, based on an objective outlook...
... not based on gut feel, emotions or rational fundamentals.
If our latest analysis is correct, we are in for an interesting couple of weeks, which will likely take many by surprise.
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To your success~