Afternoon Note
22 August 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
The ZAR stronger on the back of a global risk rally, reaching R18.7600/$ in early Tuesday trading.
Today’s Market Support and Resistance Levels:
Data This Week
Tuesday
16H00 US EXISTING HOME SALES 4.15M EXPECTED VS 4.16M PREVIOUS
Wednesday
10h00 SA CPI MOM 1.2% EXPECTED VS 0.2% PREVIOUS
10h00 SA CPI YOY 5.0% EXPECTED VS 5.4% PREVIOUS
10h00 SA CPI CORE YOY 4.9% EXPECTED VS 5.0% PREVIOUS
Thursday
14H30 US DURABLE GOODS MOM -4% VS 4.7% PREVIOUS
14H30 US INITIAL JOBLESS CLAIMS 240K VS 239K
Friday
16H05 JACKSON HOLE – JEROME POWELL SPEECH
Saturday
JACKSON HOLE SYMPOSIUM
Market Highlights
Rand sharply stronger on the back of an overnight risk rebound, after US mega tech stocks rallied sharply in New York.
The ZAR trade stronger breaking out of the recent R18.9000-19.2000/$ range.
- The local unit attracting bids, after risk assets traded higher with Gold ($1899/oz) recovering as well as the SP500 (4413).
- Overnight mega US tech stocks, like Tesla and Nvidia sharply higher and sparking a rally.
- Traders citing a market that was oversold, and any good news would likely set off a rally.
Markets “for now” ignoring Jackson Hole on Friday as well as the impact of the 15th BRICS summit happening in South Africa.
Risk assets rebounding, but traders continue to view the move as a technical bounce, not anything fundamental given the elevated levels of US yields.
- The US10YT remains at 4.30%. Gold also lower at $1892/oz.
Stocks the drivers and the risk rally appears to be more of a “profit-take on shorts” than a “turn in fundamentals”.
- The US10YT remains elevated at 4.34% and this likely to be risk negative in the “medium to long run”.
The technical picture supportive of the Dollar across the majors and we expect this to filter through on the ZAR.
Thus any ZAR gains should be used by importers to cover exposures.
Trade : BUY USDZAR on DIPS
Market Close
DOW
-36 to 3,463
SP500
+30 at 4,399
NASDAQ
+206 at 15.000
Overnight Trading
image: Trading economics
South Africa
BRICS and the DOLLAR
China, backed by Russia and South Africa, has been pushing for new members to be admitted to the alliance, an expansion that has stoked concerns the bloc is trying to position itself as a counterweight to the Group of Seven.
Leaders of the Brics nations will focus on ways to reduce dependence on dollars when they meet starting Tuesday, South African Deputy President Paul Mashatile said.
Major emerging market powers are meeting in Johannesburg August 22-24 for the Brics leaders summit.
Brazil, Russia, India, China and South Africa will discuss enlarging the group and increasing local currency trade.
With more than 20 new applications it has been reported that more than 30 heads of state will attend the event.
BRICS SECURITY
The South African National Defence Force (SANDF) has deployed troops to form part of the security detail for the upcoming BRICS Summit in Johannesburg.
Over 40 heads of state and international delegates will attend the three-day summit at the Sandton Convention Centre from Tuesday.
Police Minister Bheki Cele on Monday morning addressed hundreds of law enforcement officers that had been deployed to the Sandton area for the duration of the summit.
He said the soldiers would be an addition to the hundreds of police officers already on the streets of Sandton.
Source: Moneyweb
Global Markets
Stocks rebound continues after tech rally in New York.
US stock futures steadied on Tuesday after the major averages ended mixed during Monday’s regular session.
US mega-cap technology names outperformed the market.
In trading on Monday, the Dow lost 0.11%, while the S&P 500 and Nasdaq Composite gained 0.69% and 1.56%, respectively.
Nvidia jumped 8.5% after HSBC raised its price target on the stock to $780 ahead of the chip designer’s earnings on Wednesday.
Tesla also advanced 7.3%, recouping some losses from last week following news of more price cuts in China.
Investors now look ahead to Fed Chair Jerome Powell’s address at the central bank annual symposium at Jackson Hole, on Friday for further clues on the rates path.
Yields continue to spike.
The yield on the 10-year advanced past the 4.3% mark, the highest since November 2007.
Markets continued to fret about the hawkish outlook for the Federal Reserve and higher bond supply from the US Treasury.
US retail sales for July underscored the resilience of the US consumer.
The developments aligned with a selloff in bonds following the release of minutes from the FOMC’s latest meeting.
The members stressed that there are upside risks to inflation that could warrant further rate hikes, pressuring Treasuries in the secondary market.
Yields also remained higher due to concerns of higher bond supply after the government increased the amount of debt auctioned at the beginning of the month.
Source: CNBC
Overnight Headlines
Asian Markets
Asian equities higher.
In Japan The Nikkei 225 Index jumped 0.92% to close at 31,857, rising for the second straight session.
Technology stocks leading the advance as investors scooped up shares following a sharp correction in the sector.
Japanese technology stocks also tracked their US peers higher as traders braced for Nvidia’s earnings report on Wednesday.
In corporate news, SoftBank Group jumped 1.4% after its chip unit Arm filed for a Nasdaq listing overnight.
Source : Reuters
In China, the Shanghai Composite rose 0.88% to close at 3,120, with benchmarks rising slightly from multi-month lows led by a rebound in technology stocks.
Mainland stocks also tracked global peers higher despite rising US Treasury yields.
Investors focusing on Nvidia’s earnings report on Wednesday. and the Jackson Hole symposium of central bankers in the US on Friday.
Energy
Oil prices steady.
Brent crude futures steadied above $84/bl on Tuesday after losing some ground in the previous session, as traders continued to assess various demand and supply factors.
Economic uncertainties in China continued to weigh on the demand outlook.
Policy support measures from Beijing have so far failed to convince markets of a stronger recovery in the world’s top crude importer.
Investors also braced for preliminary US August PMI data and the Federal Reserve’s annual economic symposium at Jackson Hole later this week.
On the supply side, output cuts from OPEC+ majors Saudi Arabia and Russia provided a floor to oil prices.
Source: Gulf news
Metals
Precious metals higher.
Gold traded higher above $1,900 /oz on Tuesday, hovering close to its lowest levels in five months amid a stronger dollar and Treasury yields.
Traders citing expectations that the Federal Reserve will keep monetary policy restrictive for some time.
Minutes of the Fed’s July meeting released last week suggested further interest rate hikes could be ahead due to upside risks to inflation.
Meanwhile, investors braced for an annual gathering of central bankers at Jackson Hole later this week to guide the economic and interest rate outlook.
Source: Kitco
Currencies
Dollar retreated after market Risk appetite returns.
The dollar index held above 103 on Tuesday, hovering close to its highest levels in over two months underpinned by rising US Treasury yields.
Traders still adding bets that the Federal Reserve will keep monetary policy restrictive for some time.
Investors now look ahead to Fed Chair Jerome Powell’s address at the central bank’s annual symposium at Jackson Hole later this week.
Traders keenly looking for further clues on the rates path.
Source : Forexlive