This is a short introduction to our all new Weekly Rand Review.

A burning question we often receive is this: " What made the markets do that?" or "Why did the markets suddenly move like this?".

In this weekly email, we will review the financial happenings, Rand movements, and general forex news from the past week, to give you some valuable insight in answer to that question.

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To your success~

James Paynter

How It Happened (31 May - 3 June 2016)

Last week loomed over South Africa for quite some time. Most were only thinking about the dreaded Standard & Poors Junk Status decision on Friday evening.

The emotions in the build-up to this event affected the markets the whole week through. Anticipation was high, and tension likewise.

Friday also happened to be the release of US Non-Farm Payrolls - a notorious trigger for large market moves.

The Rand opened at a rate of R15.7724/$ on Monday morning, with our bi-weekly forecast giving the direction to be in a very precarious position.

Such was the volatility of the Rand, and the expectation of South Africa, it left the sentiment divided.

USDZAR_NTU Click to enlarge

The rand firmed on Tuesday helped by a recovery in commodity prices and as expectations the US interest rates could rise next month waned.

After the SA Trade Balance came our positive, the Rand strengthened all of 15 cents in the afternoon, and this left the closing price on Tuesday in the 15.70-15.75 area, when it had started the day closer to 15.90 to the US Dollar.

The rand was a touch firmer against the dollar on Wednesday, but was unlikely to post significant gains during the week as investors fretted about Friday's credit rating review from Standard & Poor's.

(If you did not see last week's post on the effect of a junk status rating downgrade, Click to enlarge

Some early movement was seen on the morn of the big day, with the Rand gaining about 10c to the Dollar from the close of business on Wednesday.

This meant that at the start of the working day, the market was sitting at about R14.55/$ - some of the lowest levels we have seen in a long time.

With such a critical day ahead, our forecast outlook (see below - click to enlarge) suggested that the Rand will retrace a tad, before continuing its downward movement. This retracement prediction could have been due to pre-match jitters of Brexit, or possibly that a non favourable outcome was coming later in the day. Either way, the overall direction was clear, even if there was likely to be some choppiness along the way.

USDZAR_NTU Click to enlarge

The Rand was very quiet on Thursday, with all eyes nervously focused on Friday's big movers.

The Dollar/Rand edged lower on Friday as traders focused initially on Non-Farm Payrolls later in the day which would give the Federal Reserve some indications on when to lift interest rates further.

As the Non-Farm Payrolls results came out much worse than expected, the Dollar weakened sharply, pushing the Rand down to the R15.27/$ area.

There was then a lull until the dreaded Junk Status decision.

When the good news finally hit at around 6pm, the Rand rallied further to trade at its lowest level this month at R15.05/$.

The Week Ahead (6-10 June 2016)

As we head into the new week, there is definitely more positive sentiment around than when we started last week! I bet even Pravin Gordhan is smiling this morning (let's trust that his political opponents don't try and upset the apple-cart).

This week sees very little in the way of any major data releases or events, with domestic and Euro area GDP releases on Tuesday probably being the most important.

Our forecast for the Rand against all three majors (USD, EUR and GBP) is showing a promising outlook, with the Rand looking to test below the R15/$, 17/€ and 21.50/£ mark respectively.

These are areas that some thought we would never see again just last week (apart from those that have our big picture of course).

I trust this gave you some insight into the Rand's movements.

As always, I would love to hear your comments and feedback - please leave a comment below.

To your success~

James Paynter

James Paynter

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