22 September 2023
Support & Resistance Levels
Data This Week
ZAR range trading continues in early trading as the local unit looks for direction from international markets.
Today’s Market & Resistance Levels
Data This Week
Nothing of significance
11H00 EU INFLATION 5.3% EXPECTED YOY
14H30 US BUILDING PERMITS 1.44MM
08H00 UK INFLATION 7.1% CPI YOY EXPECTED
10H00 SA INFLATION 4.9% EXPECTED VS 4.7 PREVIOUS
13H00 SA RETAIL SALES -0.5% MOM EXPECTED VS +0.2% PREVIOUS
20H00 US FED FOMC RATE DECISION – UNCHANGED EXPECTED
20H30 US FED PRESS CONFERENCE
15H00 SA SARB MPC UNCHANGED REPO AT 8.25%
16H00 ECB LAGARDE SPEAKS.
01H30 JP INFLATION AT 13H30
05H00 JP BOJ DECISION
The ZAR continues to hold below the R19/$ level as the unit once again threatens the R18.80/$ level.
Markets pretty undecided and after 2 days of risk asset selling, stocks as well as G7 Fx recovering in Friday’s European trading session.
Both the Fed, BOE and SARB announcements continue weigh on markets.
- Earlier this morning the BOJ maintained their zero rate policy providing markets with a little boost ahead of the long weekend.
ZAR traders happy to play the range, but the USDZAR rate does appear heavy as it once again tests 18.8000.
- Levels above 19 (for now) being rejected.
This afternoon’s US PMI’s likely to provide more evidence of a roaring US economy and for the Fed to leave “rate higher for longer”.
The ZAR on a relative basis remains well bid vs the Dollar and the crosses.
- This even as the US dollar makes a run at 106 and USDJPY at 150.
- We expect the relationship to hold and the ZAR to weaken accordingly.
At the time of writing we have DXY 105.58, GOLD 1925, Brent crude 94.35 and the US10YT 4.48%.
Trade: Buy USDZAR on dips , add through R19.10/$
-370 to 34,447
-37 to 4,330
-245 to 14,700
Image: Trading Economics
JOBURG TAPS RUN DRY
Johannesburg Water says most of its systems have lost capacity and are now on their last legs.
This follows a power failure at the Zuikerbosch Water Treatment Plant on Tuesday night.
It came as the city was already experiencing shortages because of a recent spike in demand.
Johannesburg Water says South Hills Tower is now empty with no water expected in the supply zone.
In Midrand, meanwhile, the Grand Central, Errand and President Park reservoirs and towers are also low to empty.
Johannesburg Water says alternative water supplies have been made available to those affected.
It also urged the public to adhere to the level water restrictions currently in place until the end of March.
ESKOM CEO SEARCH
Eskom board at odds with Gordhan over CEO search.
Eskom said it reviewed 150 potential candidates in its global search for a CEO and had identified ‘a clear number one,’ with two others as joint runner-up.
The protracted search for Eskom’s new chief executive officer has raised tensions between the Gordhan and the Eskom board.
Andre de Ruyter announced his resignation as CEO nine months ago, yet a permanent replacement hasn’t been named despite an ongoing energy crisis that is taking an ever-increasing toll on the economy.
A candidate put forward by the board was rejected by Public Enterprises Minister Pravin Gordhan, News24 reported on Wednesday.
Some board members threatened to quit in the coming weeks if Gordhan rejects their recommendation, another person said.
US stock futures edged higher on Friday after the market saw another day of heavy losses during Thursday’s regular session.
Traders citing the Federal Reserve’s hawkish pause this week continued to weigh on sentiment.
The Fed kept interest rates unchanged as widely expected on Wednesday, but signalled another rate hike before the end.
In regular trading on Thursday, the Dow fell 1.08%, the S&P 500 tumbled 1.64% and the Nasdaq plunged 1.82%.
Those losses came as the 10-year Treasury yields surged to 16-year highs on the back of the central bank’s hawkish tone.
Investors were also kept on edge about a government shutdown after House Republican leaders sent the chamber into recess on Thursday.
Source: Trading Economics
The yield on the US 10-year Treasury note surged by nearly 13 basis points, almost touching 4.5%, the highest level since October 2007.
Traders grew increasingly convinced that interest rates would have to stay elevated for longer as the US economy remains strong.
Additionally, the yield on the 2-year note spiked to almost 5.2%, approaching its highest level since November 2000.
The Federal Reserve kept interest rates steady in its September meeting as expected, but paved the way for an additional rate hike this year.
It also trimmed the amount of expected rate cuts for 2024 as it revised GDP higher in 2024.
Stocks lower after Wallstreet sell-off deepens.
In Japan, the Nikkei 225 fell 0.52% to close at 32,402, extending recent losses after the BOJ maintained its ultra-easy monetary policy.
The decision dashing hopes that the central bank would hint at an end to its negative interest rates policy.
Japanese shares also tracked losses on Wall Street overnight as the US Federal Reserve’s hawkish pause continued to weigh on investor sentiment.
Meanwhile, investors digested data showing Japan’s headline inflation rate slowed to 3.2% in August from 3.3% in July.
The Nikkei 225 declined 3.4% this week for its worst weekly performance since December last year.
Oil higher as Russia threatens more supply disruptions.
Brent crude futures rose toward $94/bl, hovering close to ten-month highs.
Traders citing concerns that a Russian ban on fuel exports could tighten global oil supply further.
The Russian government announced Thursday it will temporarily restrict exports of gasoline and diesel to stabilize fuel prices in the domestic market.
The ban comes after exports of diesel from the country have fallen by nearly a third in the first two weeks of September.
Official data also showed that US crude inventories fell by 2.135 million barrels last week.
Source: GULF news
Precious metals steady.
Gold weakened below $1,930/oz, retreating from multi-week highs amid a general dollar strength after the US Federal Reserve delivered a hawkish pause.
The US central bank left interest rates unchanged as widely anticipated, but signalled another rate increase before the end of the year and fewer rate cuts than previously indicated next year.
Meanwhile, in Europe the tightening cycle has likely come to an end.
Gold continues to track the Dollar and remains highly correlated.
The Bank of England unexpectedly opted for a halt in interest rates due to cooling inflationary pressures and hindered growth prospects.
Dollar higher after the Fed and rising yields.
The dollar rose above 105.5, its highest since early March after the Federal Reserve signalled a rate hike may be still on the table.
The Fed kept the target range for the fund’s rate at 5.25%-5.5% and one more increase this year, then only two cuts in 2024.
Meanwhile, the US economy continues to show signs of resilience, with weekly claims down to 201K last week, the lowest level since.
The Yen weakened to below 148 per dollar, the lowest since early November.