Markets got served a weaker-than-expected US Core CPI print last week which supports the Federal Reserves’ fight to get inflation back to 2%. US Core CPI grew 3.2% year-on-year in July, up marginally compared to June’s print of 3%. This week markets will get fresh information regarding the Fed’s inflation fight with the latest FOMC meeting minutes.
Last week also brought some positive local data prints which included a stronger than expected gold, mining and manufacturing production figures for June. The next week is relatively quiet on the calendar. Besides the FOMC meeting minutes, the Eurozone is expected to bring CPI figures of 5.3%.
The dollar had another strong week last week despite the weaker-than-expected US CPI results which saw the DXY maintain levels above the 50-day MA of 102.230. The DXY looks set to climb higher this week which will see the dollar test the 200-day level of 103.340. The RSI is also suggestive that the greenback has room to appreciate before sliding into overbought zones.
The US S&P 500 index is currently sitting on the crucial 50-day MA rate of $4,438. It is difficult to predict where equities will go but a failed break below the 50-day MA could allow equities to push higher towards $4,650. A break below the 50-day MA will however invalidate the 5-wave impulse pattern which will see the index fall to the 61.8% Fibonacci retracement level of $4,310.
Checking in on the US 10-year yield it looks like yields are holding levels above 4.00% and a break above 4.20% will allow the bond to bend further towards the 2022 high of 4.328%.
It was not smooth sailing for the rand last week after the local unit depreciated by roughly 3.00%. The USDZAR pair is forming a 5-wave impulse pattern which could see the rand slide further towards the 19.30s. The MACD is holding a buy signal and the RSI still has room to move higher before hitting overbought zones.
