Afternoon Note
05 October 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
ZAR reaching weakest level since June 2023, breaching 19.5000 in early JHB trading.
Today’s Market & Resistance Levels
Data This Week
Monday
Tuesday
14h00 ATLANTA FED Raphael Bostic speaks
16h00 US JOLTS JOB OPENINGS 8.8M EXPECTED
Wednesday
09H15 SA GLOBAL PMI 50.3 EXPECTED
10H00 ECB’S LAGARDE SPEAKS
11H00 EU RETAIL SALES -0.3% MOM
11H00 EU PPI 0.6% MOM EXPECTED
14H15 US ADP EMPLOYMENT DATA +153K EXPECTED
16H00 US ISM SERVICES PMI 53.6 EXPECTED
Thursday
14H30 US WEEKLY JOBLESS CLAIMS +210K EXPECTED
Friday
14H30 US NON FARM PAYROLLS +163K EXPECTED
14H30 US UNEMPPLOYMENT 3.7% EXPECTED
Market Highlights
The ZAR suffered at the hands of a rampant Dollar trading above R19.5000/$ before finding some support
JHB interbank traders all citing exporters booking some profits ahead of this afternoon’s weekly jobless claims and FED speakers.
Technically , the ZAR losing ground as the Dollar continues to break through key resistance levels and its hard to argue against the Buck’s momentum.
A solid close above 19.5000 will open up room for 19.74 to the all-time $ high of R19.91/$
Adding to the fall was SARB governor , saying they won’t defend depreciating rand.
The Rand has weakened about 13% against the greenback this year.
Recall, the spike in yields driving a Risk off narrative in the market place.
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- Traders of the opinion, the Fed will keep interest rates elevated longer.
- All of this adding to a long Dollar i.e. Bullish bet.
This week the dollar appreciated vs both G7 and EMFX as the 10-year US yield rallied to its highest levels since 2007.
Strong data indicated by the services ISM PMI figures and manufacturer’s survey, supported the Fed’s stance.
However, job data presented a mixed picture, with the JOLTS higher and ADP lower.
Traders now await more comprehensive US NFP report on Friday and keep an eye on statements from Fed officials.
This morning we opening weaker, as traders once again open the session in a “risk off” mode.
We expect a break of 19.4000 to open up a move to 19.5000-19.8000.
Risk event: Weekly jobless claims at 14h30
Trade:
BUY USDZAR on dips (we are above 19.3000)
Target 19.74000-19.9100
Market Close
DOW
+127 to 33,129
SP500
+34 at 4,263
NASDAQ
+176 to 14,776
Overnight Trading
Image: Trading Economics
South Africa
THE RAND
“SARB won’t defend depreciating Rand”- Kganyago
The Rand has weakened about 13% against the greenback this year.
SA’s central bank Governor Lesetja Kganyago said on Thursday that the bank would not step in to protect the local currency, despite its current weakness and that the rand was caught up in a realignment of global currencies.
Kganyago told a webinar that the bank was only concerned about the currency to the extent that it fed into inflation and would not take any measures to defend it.
“It’s a futile exercise trying to defend the exchange rate,” Kganyago said.
Nonetheless, Kganyago said the bank’s main concern remained fighting inflation, reiterating that risks to the inflation outlook included food prices, oil prices and exchange-rate moves.
Source: EWN
ANC PROPOSES QUOTA ON FOREIGN NATIONALS
The ANC in Gauteng said it wants to introduce quotas on the number of foreign nationals private companies can employ.
The party’s provincial leadership held a media briefing on Wednesday, at the ANC Ruth First House in Johannesburg.
The briefing was to communicate outcomes taken by the party’s provincial executive committee during a meeting held on Monday.
ANC provincial secretary said the party is worried about the high number of foreigners employed within the hospitality sector.
Nciza said the ANC needs to do something to address the high levels of unemployment in the country.
“We have a private sector that is not coming to the party. We are calling upon them to start employing South Africans and let’s agree on a quota and we will engage – including our leaders at national.”
“We must have a quota. We will start in Gauteng, we will engage on these matters so we believe that it is time.”
Source: Moneyweb
Global Markets
Stocks
Stock futures in the US were slightly lower on Thursday, with contracts on both the S&P 500 and the Dow Jones losing about 0.3% and the Nasdaq 100 falling 0.1%, after closing in the green the day before.
Traders await the claims report due early in the morning and key payrolls figures due tomorrow for further clues on the labour market performance.
Comments from several Fed officials will also be in the spotlight.
Yet, volatility is set to persist despite an apparent stabilization in the bond market, as borrowing costs remain elevated at multi-year highs.
Source: Trading Economics
Bonds
The yield on the US 10-year note steadied near 4.75%, easing from the 16-year high of 4.8% touched earlier in the week.
The yield on the 10-year note is nearly 20bps higher in October as the Fed is expected to hold rates higher for a prolonged period.
In addition to growing concerns that neutral borrowing costs are likely to shift considerably higher from levels post-2008.
Services ISM PMI figures consolidated the resilience in the sector, backing improved results from the manufacturer’s survey.
Additionally, data from the JOLTs consolidated evidence of tightness in the labour market, despite a slower reading from the ADP report.
Fed policymakers Bowman and Mester flagged the possibility of another rate hike this year, while Bostic warned that the funds rate will need to remain at the terminal level for longer.
Source: Bloomberg
Overnight Headlines
Asian Markets
Stocks higher on receding yields.
In Japan the Nikkei 225 Index jumped 1.8% to close at 31,075, snapping a five-day decline and taking cues from a positive lead on Wall Street.
Softer-than-expected US jobs data drove bond yields lower, giving equities a much needed reprieve.
The benchmark 10-year US yield fell below 4.8%, retreating from its highest levels since 2007.
Meanwhile, investors continued to track the yen amid reports that suggest Japanese authorities did not conduct currency intervention when it plunged to 150 per dollar on Tuesday.
Notable gains were seen from index heavyweights such as Toyota Motor (4.5%), Mitsubishi UFJ (4%).
Source: Reuters
Energy
Oil prices finding support.
WTI crude futures stabilized above $84 per barrel on Thursday as OPEC+ made no changes to its output policy and maintained previously announced production cuts.
That would include Saudi Arabia’s voluntary output cut of 1 million barrels per day and Russia’s 300,000 bpd voluntary export curb until the end of the year.
Meanwhile, the US oil benchmark plunged over 5% on Wednesday to its lowest levels in a month after official data indicated extremely weak US fuel demand.
The EIA reported US gasoline demand’s four-week average fell last week to 8.3 million bpd, the lowest for this time of the year since 1998.
Oil prices were also pressured by news that Russia may lift its diesel ban in the coming days.
Moreover, investors turned cautious amid growing concern about a looming slump in global economic growth.
Source: GULF news
Metals
Precious metals rebound.
Gold firmed up above $1,820 /oz on Thursday, rebounding slightly from seven-month lows as the dollar and Treasury yields pulled back on weaker-than-expected US jobs data.
The metal came under heavy selling pressure last week amid hawkish signals from the US Federal Reserve, but traders are starting to scale back those bets in light of recent data.
The US ADP report showed that private job growth totalled 89,000 in September, the least since January 2021 and well below the 153,000 expected by analysts.
Meanwhile, the ISM Services PMI pointed to a slower albeit strong growth in the services sector in September and factory orders rose way more than expected in August.
Investors now look ahead to weekly jobless claims data on Thursday and September’s nonfarm payrolls report on Friday for further guidance.
Source: KITCO
Currencies
Dollar scaling new high’s.
The dollar index fell to around 106.5 on Thursday, extending losses from the previous session and tracking Treasury yields lower.
Softer-than-expected US jobs data lowered the odds that the Federal Reserve would raise interest rates again this year.
The ADP report showed that private job growth totalled 89,000 in September, the least since January 2021 and well below the 153,000 expected by analysts.
Meanwhile, the ISM Services PMI pointed to a slower albeit strong growth in the services sector in September and factory orders rose way more than expected in August.
The dollar weakened across the board.
Source: Forexlive