US Dollar vs Rand: Rand volatile amidst run on Wall Street

Rand crashes to worst in 12 months - what's next?

Volatility continues to abound in the markets – and it shows no signs of slowing down! It was a strange week for the Rand as it traded sideways – but with enormous volatility, with multiple swings happening every day.

However, this was nothing compared to what we saw on the US stock markets!

A most fascinating turning of the tables on Wall Street…

…something that has been coming a long time, and now finally the technology was there to make it happen.

We will take a bit of a deeper dive into what happened here in our full review, as it is a fascinating lesson in how markets work, how crowd-funding and power of the crowd is so important, and how technology continues to change the world we live in.

And then, of course, there is the Rand to talk about too! So let’s get into the full review!

Key Moments (25-29 January 2021)

And here were some of the headlines from the 5 days:

  • Vaccine troubles roll on – different countries battled different problems, from distribution globally, to funding locally…but is a vaccine really a solution?
  • Stock market casino – Reddit, the social media platform, took hold of the US stock market in a modern-age run on Wall Street…what days we live in!
  • Eskom worries – it looks like more tariff increases after regulators have allowed the energy company to collect an additional R6bn in revenue
  • China-Taiwan tensions – China has stepped up its rhetoric and aggressive activities towards Taiwan.

After the chaotic period from the election to the Biden ‘inauguration’, many were hoping this would be the time for markets to return to normal…

…with expectations that the Rand, together with emerging markets would be the big winners from more stability.

But, amidst a flurry of a staggering 37 Executive Orders issued by Biden in an attempt to reverse everything Trump has done, the Rand was as choppy as ever, trading between R15.35-R15.00 for the duration of the week.

Local eyes continue to be on the vaccine rollout, with no clear path to payment for it appearing just yet. It looks to be at least R24bn from initial estimates, to cover 40 million persons – money which the treasury doesn’t have on hand.

But the safety of the medication should be at the forefront of this discussion, as a complete lack of adequate testing before approval for global use means that this is an experimental vaccine – completely uncharted waters!

Typical time for approval for human use is in the order of 7-10 years, and most of these developments never make it to market.

How is it that this has been developed in less than a year, and is 100% safe? It sounds doubtful at best – and ominously dangerous at worst.

Merck this last week has halted development, as their product was in fact worse than persons just getting sick and then developing natural immunity.

It is also becoming evident that actual death rates from this Covid-19 have been specially inflated, with many deaths from other causes being laballed as Covid-19 deaths – resulting in deaths from flu, heart attacks, pneumonia, etc all having reduced compared with previous years.

The World Health Organization last week also issued new test guidelines, appearing to acknowledge that testing methods had led to false positives.

And in a huge turnabout, the American Journal of Medicine admitted their stand on Hydroxychloroquine (HCQ) as a treatment was wrong…with Facebook announcing it ‘made a mistake’ when it censored studies showing HCQ saved lives.

(Remember how President Trump was lambasted and ridiculed for promoting this ‘unsafe drug’ that has been used the world over for years?)

The facts are that, apart from those of age 75+, mortality rate is not much more than a bad seasonal flu.

Pandemic?

I don’t think so.

Sadly, we are living in a world full of misinformation, sinister hidden agendas, biased reporting and blatant propaganda. And from the anti-vaccine riots and protests taking place in the UK and Europe the past couple of weeks, persons are realizing this and have finally had enough…

And then in other news…

  • The US Stock market got turned into an incredible casino this last week, in one of the greatest rallies of the little guy against Wall Street. Reddit, a social media platform, was used to coordinate an effective attack against hedge funds who make their money off of shorting stocks into the ground. Using massive influence and crowdfunding, they bought up a largely unimpressive stock called Gamestop, taking it from $20 up to over $480, inflicting MASSIVE losses for companies who were shorting this market. It then proceeded to be coordinated on a bunch of other over-shorted stocks, as Wall Street had the tables turned on them for the first time since 2008.

    But Big Tech and many platforms flexed their muscle in cruel actions, shutting down different groups who were involved in this on Facebook and Discord, and also trading platforms like Robinhood stopped allowing persons to buy Gamestop, only allowing them to sell! To make matters worse, they even closed out trades by individuals on their behalf at lows of the market, inflicting massive losses. This is going to blow up MUCH bigger than anyone expected…expect court cases (which are already in action), Congress getting involved as well as the SEC etc. The Wall Street monopoly is coming under threat as the populist rising against rigged institutions continues!
  • Locally, Eskom troubles have continued with the power company battling to keep up with demand. Now they have been given the green light to rake in an additional R6bn in profits by regulators – and although it still requires approval, it appears that tariff increases of up to 10.95% are coming in April. Eskom too announced that they are wanting to charge those generating their own electricity through solar, wind etc for their use of the grid, which will be a fixed monthly fee. All this is just going to drive persons to go right off the grid, resulting in less revenue for Eskom anyway! Senseless decisions abound…
  • Communist China seems to have stepped up the war rhetoric towards Taiwan (perhaps testing the USA’s resolve to defend Taiwan?), warning the island that “independence means war” after recently ramping up aggressive military activities (including repeatedly violating Taiwan airspace with multiple military aircraft). Some tense times ahead here…
  • The IMF released their 2021 predictions, and showed an expected 5.5% global growth, and 2.8% in SA due to vaccines. This is ambitious seeing as everything is still up in the air, and these have not even been tested properly yet. After a terrible 2020 in which between 7.1-7.5% of the country’s GDP contracted, any growth would be welcome, even if only 2.8%!

To get back to the Rand, the same choppy trade continued…

Friday saw us bounce between R15.28 and R14.95 before eventually ending the South African close just over R15/$, before moving higher to end around R15.15!

It had been a real up and down week…we await a clear breakout.

The Week Ahead (1-5 February 2021)

Well, can you believe it, we are into February already!

As we look to the week ahead, apart from all of the other points we have discussed, there were a bunch of economic events coming up:

  • USA – Jobless Claims, Non Farm Payrolls, Goods Trade Balance
  • UK & EU – GDP, Consumer Price Index, Interest Rate Decision, Monetary Policy and BoE Minutes

So plenty to rock the boat here!

Expect some rocky roads ahead on the stock market front this next week – the show is not over by any matter of means as crowd-funders take on Wall Street. Factually, it has the potential to spark a massive collapse in a market that has been rising on hot air and is way over-inflated.

And then, of course, we also have President Trump’s impeachment hearing approaching, which appears to be dead in water based on needing 2/3 vote in the Senate, but this could backfire on Democrats with Trump’s team having the opportunity to publicly reveal some potentially damning evidence.

Trump announced last week that he had opened “The Office of the Former President” to continue his administration’s agenda and also met House Minority Leader McCarthy to discuss the way forward – letting the world know he intends to remain very much involved!

So, lots going on here and many potential triggers this week…watch this space. As for the Rand, our Elliott Wave based forecasting system has served us well in calling the recent lows and we will continue to look to it to give us direction for the days, weeks and months ahead.

Please take our Rand forecasting service for a test-drive!

This will give you access to the same charts we are to give us and our clients the likely direction of the Rand – ahead of time, enabling you to make educated and informed decision.

Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.

Click here to access to our forecast from Friday on the house!

If you have any questions or feedback, please let me know.

To your success~ James Paynter

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