Where to Next for the Post-Zexit Rand?

This was the week. The week of all weeks. The long awaited (more than 9 years for some!) fall of President Zuma, as he finally admitted defeat and resigned as President of South Africa.

There were celebrations countrywide...

...a lot of work to be done, but many saw this as light at the end of the tunnel.

What a change of president does not change is the underlying factors though - and these are what are crucial in the coming days.

Ramaphosa is going to have big plans…and we are yet to see what they are. He has inherited nothing less than a mess.

There are a lot of determining factors which give us some idea of what is ahead - please click to register and join me on Thursday at 19h00 SA time with for a live webinar with Andrew Rissik, Forex Expert & Director at Sable Forex, as we go over #Zexit, SONA and Budget 2018.

It is going to be an all important webinar, where we really open up these events, and give guidance as to what is coming in 2018.

I would love to see you there - we will gladly answer all your questions.

But for now, the review of the previous week…

The week began with our forecast on Friday, giving us an updated look for the week ahead - it was always going to be a big one, with the ANC Presidency still hanging on a knife edge. The expected outlook was to move up toward R12.38, but more important was the 11.8737 level - if we broke below that, then we were to expect more downside.

This is one of the crucial points of Elliott Wave tracking - it is not a perfect system (and no system is) - but you know when your expectations were wrong. There is always an invalidation level. And this is crucial to any decision making process.

USDZAR_STU Click to enlarge

To name a few of the key moments from this week…

  • Zexit - there was never going to be a bigger event than the long overdue resignation of Presiden Zuma…but what follows is going to be of all importance
  • Ramaphosa, President of South Africa - his time finally arrived on Thursday, as he was sworn in as the next South African President.
  • Possible Cabinet Reshuffle - Zuma had 12 of them…Ramaphosa looks to be about to have his first - hopefully one for the better this time around!
  • SONA 2018 - a very different message from previous years was given by Ramaphosa...
  • Shocking Florida shooting - another catastrophe in the USA as 17 students are killed
  • US Stock & Crypto Market - a recovery after a few weeks of swift decline, has restored some stability to the global financial world.

On Monday, we had another of our pieces featured on Fin24.com - if you are interested, you can read and share it over here

But where else to start with the review of the week but with the famous #Zexit moment, where Zuma called a very late press conference on Wednesday, and announced his resignation for Presidency...

A momentous occasion - and clearly not one he enjoyed, as he was unhappy about the way he was pushed out ... having done 'nothing wrong'!

There did not seem to be a lot of commendation for his 8 years of 'service' to the country. And suddenly, it was all over, and on Thursday, Cyril Rampahosa was President of the Republic of South Africa.

A new era began.

And what about the Rand during this time?

Well, it was nothing short of a bumpy ride, which was to be expected. However, many were impressed as we saw levels that had not been reached since early 2015 - a very long time ago!

It has been a very solid year for the Rand, that is sure - and Ramaphosa was looking to try and back this Rand strength up with a rejig of the economy in 2018, saying 2018 is the year to transform it.

On Friday, we saw the USDZAR touch as low as R11.56/$...who would have thought?

What is more interesting is that the Elliott Wave Principle saw this coming a long time ago - as long ago as January 2016, when we released this long term forecast:

USDZAR_STU Click to enlarge

Not many (if any) saw the Rand as positive back then Everyone was thinking R20/$ and beyond - some even said R50! So, as always, it is when the sentiment level is at an extreme that things turn. Which is why we need to watch the 'Ramaphosa Effect' closely, as it is driving things dangerously positive. It won't go on forever.

When the sentiment hits that extreme point, the Rand's run will halt...possibly for a time, but halt, none the less.

But for now, we can take a look at this chart which is rather pretty for importers and investors, but not that pretty at all for exporters and local manufacturers...

Our forecast for the latter half of the week showed that the Rand had one more expected stab lower coming, before bottoming out.

USDZAR_STU Click to enlarge

Other noteworthy events from this past week were overshadowed by the political situation - however, some of them were quite interesting news. On Wednesday (in the USA, CPI for January came in above expectations, and even with Zuma not budging, and prospect of more US Rate Hikes, the Rand kept strengthening. Markets just do not track with logic - it may seem silly to repeat this, but it is so crucial to understanding how to keep your emotions under control.

Also, later in the week, predictions were that the next #CabinetReshuffle are just around the corner - and the big question on that one was Gigaba. Gigaba, the Finance Minister, was installed when Pravin Gordhan was fired by the then President Zuma...

...as it turned out, Pravin was victimized unfairly, when he was trying to actually get somewhere - fighting the tide against #StateCapture, Guptas, and who knows what else...

...so, would he (Gigaba), stand up to a Ramaphosa reshuffle?? It remains to be seen...

He is not getting himself into a good position with comments earlier in the week such as "Political uncertainty won't affect economy" which is absolutely flawed - an unstable government does not assist the economy at all!

So, with his future uncertain, that is going to be a big one heading into this week, with his budget speech on Wednesday. Gigaba did give some indication of his thoughts on the matter...

One thing is clear - Ramaphosa has his work cut-out over the next few months to resuscitate a fragile economy, and first step was SONA 2018 on Friday, and then next Wednesday’s all important Budget Speech.

The Budget Speech, together with the State of the Nation Address from Friday give us a good indication of what a Ramaphosa Presidency has in store.

Other news from the week - the fated Day Zero in Cape Town is now into June, giving some breathing space...

...but remains a critical situation.

Ramaphosa closed out the week with the delayed SONA speech...but more on that next week, on our webinar with Andrew Rissik. Please do join us!

The Week Ahead (19-23 Feb 2018)

This week opens with the Rand still on the front foot, but for how much longer?

While we digest Ramaphosa's SONA address, which appeared to have a very different tone overall, yet included a firm commitment to proceed with expropriation of land without compensation...(ominous stuff)

...and with the Guptas on the run ... and the Budget speech on Wednesday, there is plenty to keep us on our toes.

We plan to discuss all this in our webinar with Andrew Rissik on Thursday.

We would love to see you there. Simply click below to join us...

Register Now

Kind regards,
James Paynter

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