Afternoon Note
01 September 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
ZAR recovering in early JHB trading to reach 18.7200 ahead of today’s NFP report.
Today’s Market Support and Resistance Levels:
Data This Week
Monday
Tuesday
Wednesday
Thursday
Friday
14H30 US NON FARM PAYROLLS 170K VS 187K PREVIOUS.
14H30 US UNEMPLOYMENT RATE 3.5% VS 3.5% PREVIOUS.
16H00 US ISM MANUFACTURING 47 EXPECTED VS 46.4.
Market Highlights
The Rand reversing more than 20 cents of losses in early trading
The local unit reversing sharply as traders flip between Dollar buying or selling.
- The nervousness understandable ahead of today’s NFP report.
- Markets paying close attention to the US jobs market and expectations are for +175k jobs vs +187k previous.
The break back towards 18.7000, position squaring after yesterday’s Dollar recovery.
However the focus remains NFP later today.
We reiterate:
- Lower print will likely reverse recent Dollar gains and drives US yields lower, resulting in a Risk bounce.
- This will be ZAR supportive. The US10YT is currently at 4.11%
- Likewise, a higher than expected number will once again push yields higher, due to doubts around a Fed pause resulting in Dollar buying and weakness for the ZAR.
Trade : Go With Break USDZAR 18.6000-18.8000
Market Close
DOW
-168 to 34721
SP500
-7 to 4,507
NASDAQ
+15 at 15,575
Overnight Trading
image: Trading economics
South Africa
JOBURG CBD FIRE
Investigations into the cause of a deadly fire that broke out at a five-storey building in the Johannesburg CBD continues.
JHB metro also counting and auditing all of the inner-city’s hijacked buildings.
Seventy-four people, including 12 children died in Thursday’s blaze, while more than 50 others were injured.
It’s understood that more than 200 families lived in the Marshalltown building.
While visiting the scene on Thursday, President Cyril Ramaphosa described the tragedy as a disaster waiting to happen.
Source: EWN.
Global Markets
US stock index futures extended gains on Friday, driven by the expectation that a surprisingly sharp increase in the August unemployment rate would discourage the Federal Reserve from further tightening monetary policy.
The jobless rate rose to 3.8% in August, the highest since February 2022 and above market expectations of 3.5%.
Meanwhile, the economy added 187,000 jobs, exceeding market expectations of 170,000 but following a 110K downward revision to the prior two months of payrolls.
On Thursday, the Dow Jones lost 0.5% and the S&P 500 retreated 0.2%, while the Nasdaq Composite edged up 0.1%.
Source: Trading economics
The yield on the 10-year US Treasury note held its decline at the 4.1% mark on Thursday.
The latest economic data backed expectations that the Fed may refrain from raising interest rates in the current cycle, supporting demand for bonds in the secondary market.
The Core PCE price index edged 0.2% higher in July, unchanged from June’s seven-month low to mark the lowest back-to-back increase in over two years.
Data also pointed to a softer labour market ahead of tomorrow’s NFP report.
The results aligned with Fed Chair Powell’s Jackson Hole statements that there is uncertainty on the duration of policy transmission lags, driving policymakers to heed overtightening risk.
Source: CNBC
Overnight Headlines
Asian Markets
Asian equities higher after another Wallstreet rally.
The Nikkei 225 Index rose 0.28% to close at 32,711, climbing for the fifth consecutive session, with the Topix reaching its highest levels in 33 years.
The benchmark indexes gained more than 3% this week, pushed higher by growing expectations that the Federal Reserve is done hiking rates amid signs that the US economy may be cooling.
Domestically, investors digested data showing capital spending among Japanese firms increased 4.5% in the second quarter as corporate activity continued to recover from the pandemic-induced slowdown.
Energy
Oil prices spike higher.
US WTI crude futures rose toward $84 per barrel on Friday and were set to gain about 5% this week.
Prices underpinned by tightening supplies and expectations that OPEC+ leaders would extend output cuts through the rest of the year.
Markets expect Saudi Arabia to extend a voluntary oil production cut of 1 million barrels per day into October, and for Russia to implement export cuts through next month as well.
In the US, latest data showed that crude inventories plummeted by 10.6 million barrels last week, far exceeding forecasts for a 3.3 million barrel draw.
Still, a Reuters survey indicated that production from Iran rose to 3.1 million bpd in August, the highest since 2018, and offsetting the voluntary cuts from Saudi Arabia and Russia. Investors also remain cautious about signs of slowing demand, with weak business activity data in major economies clouding the outlook.
Source: Gulf News
Metals
Precious metals higher after jobs report.
Gold higher above $1940/oz on Friday and was set to gain for the second straight week, supported by growing expectations that the Federal Reserve is done hiking rates amid signs that the US economy may be cooling.
Data released on Thursday showed that US core PCE prices rose by a modest 0.2% in July, maintaining the same pace as in June and aligning with market expectations.
Earlier data also showed that US Q2 GDP growth was downwardly revised and private businesses in the US hired the least workers in five months during August. Investors now look ahead to a key US monthly jobs report that could offer more clues on the state of the labor market and broader economy in the US.
Source: KITCO
Currencies
Dollar lower after NFP.
The dollar index retreated to 103.3 on Friday and was set to a six-week advance, weighed down by signs that the US economy may be cooling which bolstered expectations that the Federal Reserve is done with policy tightening.
The latest US jobs report showed the unemployment rate unexpectedly rose to 3.8%, the highest since February 2022 and above market expectations of 3.5%. Meanwhile, the economy added 187,000 jobs, exceeding market expectations of 170,000 but following a 110K downward revision to the prior two months of payrolls.
Earlier, data showed that US core PCE prices rose by a modest 0.2% in July, the same as in June and in line with market expectations.
Source : Forexlive