It was more of the same in the financial markets last week following the release of the latest FOMC minutes and updated US CPI figures for September. The FOMC minutes supported the Federal Reserve’s (Fed) current stance of higher for longer interest rates while the US CPI figures for September came in higher than expected at 3.7%, year-on-year. The dollar index and US long-term yields continued to grind higher following these key data releases.
The week ahead will be a busy one. China will release their latest GDP figures for the 3Q2023 with markets expecting a 4.4% year-on-year growth rate for the world’s second largest economy. Additionally, the Peoples Bank of China will also update their interest rate decision. Given China’s sluggish recovery and turbulence in their property markets, the PBoC will most likely keep their rates unchanged at 4.20%. Looking over to the US, markets are anxiously awaiting Fed chair Powell’s speech scheduled for Thursday afternoon.
In terms of local events, the SARB will release their monetary policy review, which will undoubtedly echo the same hawkish tone like we’ve seen from the Fed recently. With local government budget deficits ballooning and a rand that is on the ropes, the SARB has little to no room to start cutting interest rates to stimulate growth given their mandate to protect the value of our currency.
First up for the charts this week is the rand. Last week was a volatile one for the rand but the local unit managed to pull the USD/ZAR pair to a two week low of 18.78. The pair is currently dancing with the 50-day MA rate of 18.97, which is a critical rate to watch. A failed break back above the 50-day MA will allow the rand to pull the pair below 18.80 with a possible move lower towards the 200-day MA rate of 18.43. A break above the 50-day MA will however signal another leg higher towards 19.90 for the pair. It’s too early to make a call now but the strength of the current upward channel seems to be fading and the break below 19.12 is, dare I say it, rand positive.
The broad based dollar index jumped aggressively higher last week Thursday following the higher than expected US CPI print but he DXY’s momentum seems to be fading. A failed break above the yearly high of 107.36 will allow the dollar to fall lower towards the 50-day MA of 104.82. The critical support level to watch is last week’s low and the 23.6% Fibonacci retracement level of 105.53.
Looking over at commodities, October has so for been a volatile month for crude oil given the recent geopolitical events in the Middle East. Crude oil touched a low of $83.50 per barrel (pb) earlier this month but the 50-day MA support rate of $88.50 held its ground to pull the price per barrel back to $90.00. For now the key resistance sits at $91.40 pb and a break above this level will allow crude to push higher and re-test the yearly high of $96.00 pb. A failed break above $91.40 pb will however allow the price to re-test the 50-day MA support rate
Just a quick check-in on the local equities front, the JSE top 40 failed to break above its 50-day MA price of R68,317 last week, after the 50% Fibonacci support at R65,600 held its ground. It’s still too early to say whether the worst is over but keep an eye on the red range between R66,430 and R67,200. If this support range holds its ground we could see a break above the 50-day MA and possibly higher towards the 200-day MA. The rand will however need to do some heavy lifting if we are to see this move materialize.
