USDZAR forecast – Could you have seen R17/$ coming?

USDZAR weekly forecast

How the tables turn… From the Rand running against all odds to break lower the week before, this week was a very different story, as we saw the local unit take an absolute pounding over R17/$.

How does this happen?

It didn’t make sense, with economists blaming lockdown for the Rand’s recent weakness… yet when the country moves to level one, the market absolutely tanks?

Such is the game of tracking the markets – it seems impossible, but when you have a system that is free of human emotion and irrationality (which almost always sends you the wrong direction), you get to prepare for these moves ahead of time.

Read on to see how we called this last week…

Key Moments (7-11 Sep 2020)

Before the week began, we issued an update to our subscribers on the 3 markets (USDZAR, EURZAR & GBPZAR) as to what we expected over the coming 5 days:

  • USDZAR – bottom out above 16.08 and then head upward of 16.43, then 16.57 before testing 16.80 and above.
  • EURZAR – bottom out above 19.04 and then head upward of 19.43, then 19.56 before testing 19.76 and above.
  • GBPZAR – bottom out in 21.19-20.77 area, then head upward of 21.55, before testing 21.96 and above.

USDZAR 18 September 2020 – Short Term Forecast

USD/ZAR Short Term Outlook

EURZAR 18 September 2020 – Short Term Forecast

EUR/ZAR Short Term Outlook

GBPZAR 18 September 2020 – Short Term Forecast

GBP/ZAR Short Term Outlook

It was certainly going to be a fascinating few days…

And fascinating it was, with some major headlines:

  • Rand Wreck – an explosive move saw the local unit back over R17/$ again…
  • SAA Bailout – it begs belief, but yet ANOTHER bailout has been issued to the crippled airline…what next?
  • Lockdown Round 2 – rising cases in countries like the UK and Iran meant something like Lockdown Round 2 was on the way…
  • China vs US – the battle is only just starting, as US and China rising tensions show no sign of slowing

And so the Rand market opened around R16.27/$, R19.28/€ and R21.06/£…

The country was now at Level 1 lockdown as of midnight, and many were hoping this was the start of positivity and the economic recovery.

For some workers, it was all systems go after having been temporarily laid off for months.

As a result, economists had high hopes for the Rand… but their hopes were dashed!

By mid-afternoon on Monday, the whole landscape had changed!

The Dollar/Rand had hit R16.94, the Euro/Rand had hit R19.89, and the Pound/Rand had hit R21.71!

All expectations had been blown out of the water…except ours and our subscribers, as in just a few hours, all of our forecasts had been validated.

What had caused this? Or even triggered it?

Economists put it down to second wave fears and the rising US & China tensions, as well as the US approaching elections with so much at stake… but actually, who cares what triggered it?!

All that matters is whether you had time to prepare for such a move!

The power of our Elliott Wave based forecasting system is that it doesn’t rely on specific events happening, but tracks the underlying patterns of sentiment and mass human emotion, which then suddenly manifest themselves in moves like these.

Fascinating, isn’t it?

And then turning to other news…

  • SAA is at the centre of more controversy, as yet another bailout was issued by the government to keep the airline afloat. This did not sit well with the Treasury, as they scrabbled to try find funds that could have been used for economic recovery following the pandemic, and instead will be funnelled into the black hole of SAA. They need about R10.5bn for a restart, according to Gordhan. How much more will be wasted here?
  • Over in the UK, things have taken a turn for the worse as the country is now heading back into stricter lockdown restrictions after rising case counts have brought worries of a second wave. And it was a similar story in Iran, one of the worst hit nations, as they began to anticipate a third wave of cases. This is inevitable, and SA’s turn will likely come sometime in the near future, as the country returns to more normality in Level 1…
  • On the global stage, things remained in a gridlock between the US and China with neither side wanting to give an inch. The fight over TikTok & WeChat apps has continued, as this has become a central point of focus in the two country’s relationships. What we are watching unfold right now is undoubtedly some of the most critical days in the history of the two global giants relationship going forward…
  • And speaking of gridlocks, the US stimulus debates dragged on, with no clear path to a bill. The House Democrats are busy preparing a new $2.4 trillion stimulus plan, but we will see whether the Republicans agree with what is proposed, as the Democratic proposals prior to this have been quite ludicrous!

And getting back to the Rand, we saw the market take a bit of a breather down to R16.80 odd over Thursday’s public holiday, but then continue the upward trend into Friday’s close:

USD/ZAR

What a few days it had been, as the market had followed our Elliott Wave based forecasting system to a T!

And before we knew it, another week had come to an end with the local unit closing out around R17.15…

The Week Ahead (28 Sep – 2 Oct 2020)

This week sees a number of major events which look set to shape the news cycle the next few days, and could provide plenty of big triggers:

  • SA – PPI YoY, Inflation Rate, Balance of Trade
  • USA – Trade Balance, Presidential Debate, GDP, Jobless claims & Non-Farm Payrolls
  • UK & EU – GDP, Inflation reports & Retail Sales

The hotting up of the US elections is going to be a focal point on the global stage, along with the long-awaited stimulus bill, if that can be moved forward…

On Tuesday night, we will see the first Presidential Debate between Trump & Biden, which is where they will be quizzed on much of their policy ideas, which markets will be watching closely around the world.

But as we saw this last week, it isn’t as simple as positive or negative news…

Rather, it’s a case of having an objective view of where the market is likely to head before such events, so that you can prepare and take action ahead of time!

We have updated a number of the longer term charts, which show that some very interesting few days, weeks and months lie ahead…

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

To your success~

James Paynter

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