Welcome to our Weekly Rand Review for 4 July 2016, where we take a look at how things unfolded last week and give you our thoughts for the week ahead.
A rollicking previous week left South Africa reeling by the time Monday morning (27 June) arrived. Brexit's effect was far greater than expected as markets globally felt the aftershocks of the event.
Everyone just wanted some stability. Any stability. Anything to help stabilize what was looking like another choppy week.
And, suprisingly to most, that was almost exactly what we got. The Rand remained firm throughout the week, steadily strengthening.
How It Happened (27 June - 1st July)
When the markets opened in early trade at R15.21/$, things did not look so bright, despite the strengthening since Friday morning. Our Short Term forecast showed that the Rand was expected to strengthen (market weaken) but there remained mixed sentiment among the masses (see below - click to enlarge), with possibility that the market could then reverse and head higher again. A critical week ahead, that was for sure.
Click to enlarge
Markets were choppy throughout Monday, with no clear indication being given as to the trend, until late afternoon. The Rand vs USD was the worst sufferer of Brexit, and really needed to make up some ground.
Unfortunately, when indication was given, it was not good news. The Rand spiked in late afternoon, topping out in the high 15.50s to the Dollar, therefore breaking through that critical level of 15.2903.
When it topped at R15.66/$ at about 18h00 SAST on Monday, it immediately turned the other way. By the time business opened on Tuesday, it was back under that 15.2903 mark, but the damage had been done.
Despite the reversal, the level being broken forced us to publish a new forecast on Tuesday morning with a revised Elliott wave count, in order to give the best possible, up-to-date information to our subscribers.
The outlook still showed a 50/50 split (see below - click to enlarge), but gave us some new levels to watch out for, as they were critical to the next few weeks of Rand movements.
Click to enlarge
Sharp, zigzag movements were the order of the day on Tuesday, but the Rand continued to strengthen against the Dollar. By the time business closed, it had had a steadier trend downwards, ending the day around the 15.20 mark. The Rand seemed to have recovered its footing, and this was a very good sign for all.
The open on Wedneday morning was just below the 15.20 mark, and it was clear that that this could be a critical day as the Rand sat "100% on the fence".
Come 17h00 SAST(close of business), the Rand was at R14.80/$. A stunning turnaround had seen it make a sharp movement downwards, as we hit below 15 levels once again. This helped the Rand to pull back some of the ground lost after the British vote to exit the European Union had caused a flight from risky assets.
The good news on Wednesday, unfortunately, did not confirm that we were out of the woods just yet, as the outlook for Thursday showed (see below - click to enlarge). With the market sitting at just over 14.80 at the start of the day, a more definite move downwards to the 14.3033 mark was needed in order to confirm that it was not going to hit the target area and then 'bounce out' again.
Thursday proved a fairly quiet day in terms of Forex markets, with the Rand steadily chugging along until late afternoon when it again strengthened strongly against the Dollar. This took it into our target area of 14.65-14.41 before it bounced off 14.60, back up into the 14.70s.
It had been a good day, with the Rand extended its rally to a third day boosted by South Africa posting the biggest trade surplus since at least 1996 as exports of precious metals and stones surged.
The Rand was now at a critical point - was it going to keep going or reverse and head higher again?
Friday was going to be an important day.
The Rand began well on Friday morning, strengthening further into the low 14.60s to the Dollar. It was fairly flat for the remainder of the day until once again, in the late afternoon, it again made some good gains against the Dollar, but without giving a definite indication into the future. It broke just a smidgen under 14.50 before closing the week at 14.55 - a full 66c better off than where it opened the week.
A good week overall from the Rand's perspective, as large inroads were made into the Brexit's aftermath effect. After starting the week a fair amount over R15/$, it closed around the R14.55/$ mark at the end of business hours on Friday.
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The Week Ahead (4-8 July 2016)
This next week will be crucial, as the Rand has been left in our target zone from Thursday's forecast, but has not made a definite move either way, to show us what the near future holds, with 14.30 being pivotal.
Brexit aftermath is still lurking in certain markets, but they should hopefully start to calm down in this coming week. And then of course we have US Non-Farm Payrolls out on Friday the 8th - a notorious trigger for big moves.
So once again, a very important week ahead of us. Watch closely.
As always, I would love to hear your comments and feedback - please leave a comment below.
To your success~