A week built up on anticipation of big action over the weekend...
...with the Rand benefiting handsomely from the expectations.
When it looked like the market had finally run out of gas, it gained a second wind, which sent it well below R13/$!
Mostly put down to the chances of a President Zuma removal in the ANC NEC meeting...
...backed up another awful terror attack in Manchester.
But while it had benefited, where does it leave the Rand after another week?
More stable?
More volatile?
Hard to say...
But...
A review of the lay of the land during the week is the best way to analyze this.
Do join us by reading on...
How It Happened (22-26 May 2017) |
So, first and foremost, the most important part of the week came at the end of the previous' weeks Friday, in the form of our forecast for the coming few days.
The market sat at R13.23 around the close of the US Market, and the outlook (see below - click to enlarge) for the next few days was for the Rand to strengthen before bottoming out. The target area was R13.31-13.14, and if the Rand went further down, then 13.0384 would be the critical level.
The market then closed for the weekend, and it was time to take a brief break, with action resuming the following Monday.
Click to enlargeAnd quite a lot of water had passed underneath the bridge even by the time Monday morning rolled around!
Trump's first trip overseas to the Middle East and Europe had been causing a few stirs of its own, with his "sword dance" seen to have been hurting the Dollar! (What WILL this economists think of next??)
Despite market volatility easing slightly from last week, event risk is high this week with the main data being: EUR and US Manufacturing figure (Tuesday), SA inflation and Fed Meeting minutes (Wednesday), SA production figures and interest rate decision (Thursday) and ending the week with US GDP (Friday).
The Rand gently strengthened through Monday morning, and by late afternoon was trading around R13.14 to the Dollar, as it strengthened into the target area.
However, in late afternoon, things seemed to change, and the market changed its direction...
By 8am the next morning, the Rand was back trading at R13.23 to the Dollar.
On Monday night, yet another tragedy had struck in England, as another horrific terrorist attack hit the country at a Manchester music concert. With 22 dead and 59 injured, and a large portion of them young persons, it was clear that England's weak stand on refugees was beginning to take its toll.
Moving on to Tuesday, this incident was said to be part of the reason for a tumultuous afternoon which followed...
After the Rand had moved to R13.31 around mid-morning, it seemed to suddenly top out.
And the market turned.
Fast.
Just a few hours later in late afternoon, the Rand had hit R13.01 to the Dollar!
A complete 30c pin-drop - a surprise to most, but at least a nice boost for South African economy!
As well as the incident in Manchester, more big news broke. Various news agencies including Bloomberg put articles out that the ANC NEC was going to discuss the option of removing Zuma from office as part of the discussions on the no-confidence motion called by opposition parties...
...how much truth or chance there was in this, who knows, but it sure was the news of the week!
Wednesday started on a good note despite some retracement from the Rand overnight.
SA's CPI (consumer price inflation) was out in the morning and it showed that the inflation had slowed to 5.3% in April - maybe adding some chance to an interest rate decrease from SARB?
Other news on the block: Trump’s budget plan had released yesterday, with markets reacting favourably to the increase in defence spending.
And despite, its retracement overnight, the market continued its trend during Wednesday morning...
...and Wednesday afternoon!
In a day of wins for the Rand, it moved smoothly to trade at R12.92 to the Dollar by Wednesday evening!
It was all Rand strength, and all supposedly on the back of the ANC NEC meeting this weekend, which could involve a discussion regarding Zuma's removal.
It is a long shot, by all means. But it seemed that was how the market was feeling...
But was it a case of "buy the rumour, sell the fact"?
The ZAR received a further boost from the US Fed, which indicated that an interest rate increase in June is a near certainty, but a further increase in 2017 is unlikely (net result dollar negative)...
...but we will just have to see how that one pans out.
Onwards to Wednesday evening where we released our next forecast.
The markets moved to a R12.9021 position by the time we did the forecast had meant that further Rand strength was expected. From late Wednesday, we were expected to see the market strengthen further into the R12.70-12.51 target area, before it would then bottom out.
Click to enlargeOn Thursday, we were expecting an SARB interest rate decision, and the general consensus was that the rates would be left the same, but the good news surrounding the inflation rate could mean a chance of a decrease in the rates by the end of the year.
It was all speculation though, as we moved into Thursday.
And this was when things started to get a little choppy...
...up until Thursday, the Rand had been beautifully smooth with its strengthening.
Now, it seems some resistance was being hit.
Choopy, undecided movement was the story of the day. And while not volatile, it was a little concerting. Perhaps the slightly over eager trading of persons on Zuma's downfall was beginning to catch up on them?
Who knows.
Anyway, SARB announced that interest rates would hold fast at 7%, once again citing politics being the main reason/risk for the inflation rate.
As the Rand bobbled along, business closed at a more than respectable R12.89/$, but there was still further action before the US Market would close.
Shortly after that, the Rand moved to make its best rate for the week of R12.83 to the greenback...
...and then turned back again!
By the time business opened on Friday, the Rand had lost 10 of its valuable cents, and traded at R12.93.
The Pound had also lost ground the day before after a poll showed the gap between Labour and the Conservative party narrowing ahead of elections on the 8th of June...
...this was going to be D-Day for England after the shock decision to have the election, and now it was hanging in the balance. The terror attack and the closing gap between the two parties was making the finale all that much more exciting...
During the course of the morning, the market retraced to R12.97 before it headed on stronger again.
Despite being a tad choppy, it strengthened hard against the USD, and went as far as to touch R12.81 to the Dollar!
By late evening, the market had steadied in the mid R12.80s, and it looked as if the week was going to close off there.
Our updated forecast was sent out to our clients as the market closed, and we were now looking to the week ahead...
The Week Ahead (29 May - 2 June 2017) |
The real guideline for the week ahead is in our forecast we released on Friday afternoon/evening...
...but that is only available to our subscribers 🙂
Here is the best sneak peak we can give you into the week ahead...
The news that Zuma has survived - AGAIN has got the week off to a rollicking start already, with the Rand hitting a best level of 12.67 (in the target area shown in Wednesday's update) before reversing sharply.
But this will by no means be the only defining event of the week.
We have an array of different economic events due, ranging from Fed speeches, to Balance of Trades, Non-Farm Payrolls and more.
As a premium service, we offer our clients a sheet with all of these events in order with their effect rated. If you are interested in these, please do let us know.
These will be key events for the week ahead, and I would advise not taking your eyes off of them.
But, first and foremost, trust the Elliott Wave Principle. That is the guideline for the days, weeks, months and years ahead of forex markets.
All the best,
James
P.S. I would love some feedback on your experience with forex and financial markets.
