to catch up if you missed it. Today I'm going to let you in on my 2nd prediction for the year – The South African rand.
In the last three months we’ve seen the rand strengthen from R15.40 down to R13,70.
We’ve seen the petrol price drop from over R16 down to R13,70 as well.
While most South Africans are expecting the rand to continue to strengthen, my charts are telling me otherwise.
Read on to find out why and how you can profit.
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The international and national problems that will cause the rand to weaken
Before we get into the charts, let’s look at the external factors that will cause the rand to drop in the near future.
First, with the Trump administration’s act to restructure the US-China trade relationship, there will be ongoing tensions between the bystander countries in Africa such as, South Africa.
As China is South Africa’s biggest trading partner, the trade tensions will have a negative impact on our local products and manufacturing sector.
Second, Moody’s and large corporations are stating that South Africa is one step away from a trifecta of junk credit ratings, which could cause massive strain on the rand.
Even JPMorgan expects the country's economic growth to remain weak against the rising interest rates and a stronger dollar.
Three analysts from JPMorgan in a report states, "South Africa enters 2019 with large vulnerabilities"
Fundamentally, we can agree that the rand will continue to weaken which confirms what the charts are also telling.
The falling wedge pattern formation is a clear prediction of a weaker Rand in 2019
In the above daily chart, we’ve seen the rand strengthen from R15.40 down to R13.70 from around July 2018 until December 2018.
However, while the rand was strengthening, the price has been forming what’s known as a falling wedge pattern.
This is a pattern where the price of the rand bounces up and down (red line) between two parallel lines before it breaks to the upside.
Once the USD/ZAR price closes above R14.50 to, we can expect an influx of investors buying the US Dollar while at the same time selling the South African rand.
This will cause the price of the rand to weaken back to R15.44 (at the top of the falling wedge formation).
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How you can profit from the falling rand in 2019
There are two main ways you can profit from the ever weakening rand.
You can either go long (buy) the USD/ZAR CFD and hold it until it hits R15.44 to the US dollar. Or you can look at buying intoany resource and industrial stocks that rise when the rand weakens.
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