Welcome to February, and the next issue of our Weekly Rand Review.
And another week of market volatility, with some three interest rate announcements, as well as unfolding geopolitical events and a push to new highs for gold...
...and then, of course, there was Eish-kom putting its load-shedding spanner in the works!
As for the Rand, reversal of fortunes came around rather quickly as it came under early pressure (did we see this coming?), but it somehow managed to pull things back nicely...
...before running out of steam again as the week wound down.
Without further ado, let's dive into the detail...
Market Pulse 📊
Price Action: R18.39-18.86 range (all on Monday) reversed Rand fortunes
Technical Setup: Support around R18.42 resistance around R18.73, R18.86
Momentum: Rand upside bias, but risks abound
Risk Events: Rate decisions and geopolitical events
Outlook: US Jobs, Trump tariffs and global drivers dominate
Key Moments (27-31 Jan 2025)
Some of the more critical factors affecting price action this week:
Rate Decisions: US Fed held steady while ECB and SARB lower rates
Eskom Load-shedding Returns: The dreaded blackouts return due to you-know-what...
Trump Tariffs & Aid Freeze : President Trump confirms that tariffs would begin from 1 February 2025...and puts a halt to federal funding and foreign aid
Gold Hits New High: Gold made a new all-time high as it briefly breached $2800 per ounce - where to now?
Monday: A Torrid Start 😩
After a couple of weeks of Rand gains, while many probably thought that we could enjoy more of the same, we were expecting something quite different, based on our analysis of the Friday prior...
...which showed that the USD/ZAR had entered its target area and was expected to reverse strongly to rise back towards R18.89/$ resistance area (see below)
Little did we know that the reversal would be that immediate - or that violent...
...as we endured a real blue Monday!Opening at R18.42/$, the Rand was under immediate pressure as it rocketed higher before and throughout the SA session to hit a high of R18.77/$...
...before easing off slightly to close a couple of cents below R18.70, as traders readied themselves for a week of rate cuts and potential tariff wars.
Tuesday: Rand Finds Some Fight🤺
Tuesday was another turbulent day for the Rand, as it came under pressure from the opening bell, pushing higher to hit R18.86 against the US dollar...
...before most Saffers had even rubbed the sleep from their eyes.
But then, as so often happens, just when it seemed all was lost, the market reversed sharply as the Rand found some fight to push the market back down...
...to close out the day in the low R18.60s, as the markets braced for the upcoming Fed interest rate decision.
Wednesday: Solid Gains as Fed Holds🤚
Wednesday saw the Rand make some solid gains after an initial test above R18.70/$, pushing lower after lunch, closing out the day just above R18.50/$...
...as the US Fed paused its rate cuts, maintaining Fed funds rate at 4.25-4.5%, while stating they were not in a hurry to lower rates, wanting to see further reduction in inflation first. This came despite President Trump calling for lower interest rate generally
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And in other news...
Trump Raises Tariffs and Halts Federal Grants, Foreign Aid
Well, things haven't slowed down since Trump took office, with daily announcements and actions taking place to make good on his promises...
...and addressing many hot potatoes that have been kicked down the road for too long.
One of these, of course, is the escalating US debt, and the massive trade deficits the US has been running with its trading partners for years...
...as Trump confirmed that tariffs would start for Canada, Mexico and China beginning in February at 25%, 25% and 10% respectively, tying this too to stopping the flow of illegal immigrants and fentanyl over the border.
Not only that, but a federal funding freeze on grants and loans was put in place to give the new administration the chance to assess that these were in line with the new administration's agenda.
And then, too, a freeze of foreign aid while these were also being assessed.
Let us guess...
...reports of gross misappropriation of taxpayer dollars and money laundering incoming next?
Stay posted...
Gold Hits New All-Time High...Expect More
Financial markets have been doing their thing of late...
...and this week it was Gold's turn, as it rocketed up to make a new all-time high of $2817 this past week...
...and in so doing, it confirmed our preferred outlook for further advances in the coming weeks.
Thursday: A Bumpy Ride 🐪
The Rand had a bumpy ride on Thursday, with a flurry of data releases, as well as SARB's rate decision...
...opening at R18.51/$, the market initially tested higher as PPI came in higher than expected at 0.7% Y-o-Y, but then managed to push stronger to hit R18.43/$ ahead of the rates announcement by the Reserve Bank as well as the ECB, with both reducing rates by 25 bps as was expected.
But although expected, this was nevertheless a trigger for a reversal, as the market immediately pushed higher to hit R18.59 before closing back below R18.55/$...
Eskom Puts the Skids on the Rand 🎿
And then it was Friday, which seemed to start without much activity, but by mid-morning the Rand was again under pressure as the market jumped to hit R18.70/$ before hitting some resistance...
...coming on the back of South Africa posting a trade surplus of R15.5bn which was lower than forecasts and a sharp reduction from the previous month's R34bn.
And then, of course, there was Eskom's announcement of imminent load shedding amid renewed claims of mismanagement and corruption, which are reportedly costing the state-owned behemoth around R1 billion per month - adding to a debt exceeding R422 billion.
...and which comes a day after the announcement of new tariff increases.
Eish, what else can one say! Will the root problem ever be addressed?
Not while it is being used as plundering mechanism by government cronies...
Anyway, on the back of this, the Rand took some pain, as it pushed above R18.70 before ending the day and week in the mid R18.60s......
not a good week - but better than it could have been!
Volatility & Risk Analysis
A lot more volatility this week, with Monday again being the biggest mover of 38c
The Average Daily Range was 24c or 1.3%
This equates to a potential profit or loss of R13,000 every day for every R1 million exposure
The Weekly Range (total fluctuation) from the highest (R18.86/$) to the lowest (R18.39/$) was again a sizable 47c or 2.6%...
...equating to a saving or loss of R26,000 for every R1 million exposure simply by taking action at the right or wrong time...
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The Week Ahead
And so, we are into February already, and what a year it has been so far...
...and the effects just two weeks into the Trump administration are still coming, with it seems no country being exempt.
And Monday dawned with the news that Trump had turned the spotlight on the South African government's land grab laws and other policies, which he said was a 'massive Human Rights VIOLATION, at a minimum' which had not been covered by the legacy media - and that all future funding would be cut off until a full investigation of the situation had been completed.
It is about time that the ANC's socialist/communist agenda was brought into the open - and it will be very interesting to see where this investigation goes - and what actions will result...
...which also begs the question - who exactly has benefitted from all this funding over the years (almost $440 million in 2023)?
Apart from the above, and ongoing potential tariff wars, of course, we have a few potential data release triggers, the biggie being US Nonfarm Payrolls of Friday:
SA: Manufacturing PMI, Global PMI, Foreign Reserves
US: Manufacturing & Services PMI, Nonfarm Payrolls, Unemployment
UK:, Interest Rate Decision
Expect more market volatility and more shocks on the geopolitical front in the week ahead!
Until next week...
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Disclaimer: The content of this Weekly Rand Review has been prepared by and constitutes the opinion of Dynamic Outcomes, a division of Dynamic Forex Solutions LLC (DFS); it is solely for informational and educational purposes and is not to be taken as advice, or an offer or solicitation to buy or sell the securities or financial products mentioned in the content nor a recommendation to participate in any particular trading strategy. No past performances of any strategy or forecasts are a guarantee of future performance; trading in financial markets involves substantial risk, and you need to do your own due diligence in managing this risk. While every care has been taken in ensuring that the content gleaned from third parties is from reliable sources, no responsibility or liability will be accepted by BeztForex or DFS as to the accuracy of the information contained here, which may be subject to correction or amendment at any time after publication.
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