Risk-off investor sentiment remains the dominant market driver at moment despite the stronger than expected US GDP results for the 3Q2023 and China’s announcement for a fresh round of economic stimulus. US GDP results for the 3Q2023 printed a growth figure of 4.1%. quarter-on-quarter, up from 2.1% in the 2Q2023 and a surprise 137 billion dollar stimulus announcement was made from Beijing last week but the sell-off in equity markets continued non the less. China will be rolling out a fresh stimulus package to support its economy, but markets see it as a sign that the ruling Communist party is growing anxious about the sluggish Chinese economic performance over recent months.

The week ahead will undoubtedly be volatile with the Federal Reserve’s interest rate decision and the US non-farm payroll print being the headlining events. The Fed is expected to leave the federal funds rate at 5.50% while NFP’s are expected to grow by a soft 182 thousand, down from 336 thousand in September. A Fed pause and weak US labour market results will support the current risk-off market sentiment.

Locally, National Treasury will be delivering the Medium-Term Budget Policy Statement on Wednesday. This is an opportunity for policymakers to publish updates to the budget’s three-year outlook based on the recent performance in taxes and spending.

Jumping into the charts, we’ll start with the US 10-year yield. The US 10-year yield is showing signs of topping out after recently touching a 16-year high just above 5.00%. It’s still too early to confirm that long-term yields have topped out but given the entrenched inflation, risk-off sentiment and growing US government debt, US long-term yields will probably remain elevated until the Fed’s interest rate policy becomes clearer. Yields of 4.80% is the first level of support and a break below this level will allow yields to ease lower towards 4.50%.

The DXY inched higher by 0.38% last week after the 50-day MA level of 105.40 held its ground. The first resistance level to watch currently sits at 107.40 a d a re-test of this level looks likely given the events on the calendar for this week. We’ll give a more concise breakdown of possible moves next week as we remain in the wait and see camp for now. I am however leaning towards continued dollar strength for the 4Q2023.

Zooming in on the rand, our local unit currently remains in the range we highlighted last week between 18.80 and 19.12. We need to see a break out of this range to determine what direction the rand will take but for now the rand remains at the mercy of swings in investor sentiment. The dance with the 50-day MA at 18.95 will continue this week and a negative tone from the Treasury budget and continued global risk-off investor sentiment following the Fed rate announcement, will strengthen the 50-day MA support.

Wrapping up the chart section this week is the US S&P500 to highlight the current risk-off sentiment. The S&P500 is falling rapidly and it recently broke below the 200-day MA of $4,240. The S&P500 has now fallen just over 10% in the 3Q2023 and the next support that will likely be tested sits around $4,000.


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