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What impact will the G20 have on the rand and why the rich are leaving South Africa

by , 08 July 2019
What impact will the G20 have on the rand and why the rich are leaving South Africa
The G20 summit in Osaka, Japan has just finished.

Who would have thought this two-day conference could have such an impact on our stocks, economy and even our currency.

And even the bullish sentiment towards the world markets and the US dollar, has left South Africa in a troubled state for the rand for rest of 2019.

Today I'm going to discuss two reasons why I expect the rand to weaken to R15.10 post the post G20 summit, and how we can profit…
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The G20 and the impact on the rand
 
Just to explain briefly, the G20 (Group 20) is an international forum for the central bank governors and the governments from 19 countries and the European Union. 
 
The G20 is an annual event with a two-day gathering which has one goal - To discuss different policies to help create international financial stability and to foster global economic co-operation. 
 
This year the main focus was on global economic risks and the trade standoff between the US and China. 
 
In fact, at the G20,President Trump and President Xi Jinping came to an agreement to renew negotiations for a new trade deal. In the meantime, the US will hold back on new tariffs and China will buy more products from US farmers.  
 
Thanks to this, we're seeing a boost of confidence in the US dollar while emerging market currencies (including the rand) weaken further.  
 
The rich are leaving South Africa
 
More bad news continues to flood South Africa as a recent report by New World Health has revealed that the number of High Net Worth Individuals (HNWI) have decreased significantly as they have chosen to move abroad.  
 
These HNWI are individuals with net assets of at least $1 million. Over the past year, the number of HNWI dropped from 43,600 to 39,200. 
 
This is due to the uncertain political climate, increasing unemployment rate, the weakening rand and the ailing South African economy.  
 
According to the report:
 
“Based on our estimates, around 3, 000 HNWIs have left South Africa over the past 10 years. Most of these individuals have gone to the UK, Australia, USA Switzerland and Portugal"
 
With the rich leaving South Africa, with their skills and assets, there is a poorer outlook and less confidence, which will cause investors to exit their current positions in the USD/ZAR and move into more stable currencies. 
 
My next prediction for the rand is R15.10
 
 
Looking at the weekly chart of the South African rand, you can see that the price has been bouncing and climbing on a strong trend line (Blue Line) since the start of 2018. 
 
Every time the USD/ZAR touches this line, it then bounces and sends the USD/ZAR price up. And right now, you can see that the price is touching this line, which means we can expect another bounce up. 
 
The first target I expect the rand to weaken to is R15.10, which is the next strong ceiling level (Green Line).
 
Considering the above factors with the G20, with the rich leaving South Africa, and with the chart analysis, this gives us a good opportunity to profit from the next rise in the US dollar against the rand.   
 
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How we can profit from the rand weakness 
 
There are two main ways you can profit from the fall. 
 
You can either go long (buy) the USD/ZAR CFD and hold it until it hits R15.10.
 
Or you can simply wait for my next trade signal as I look to buying resource stocks like Anglo, Sasol, Kumba Iron Ore and so on…
 
“Wisdom yields Wealth”
Timon Rossolimos,
Analyst, Red Hot Storm Trader 
 
P.S: In 2019 we've already banked over 120% in gains in resources alone, don't miss the next rally while the South African rand weakens to R15.10.


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