Central bank decisions fired up volatility this week, leaving the rand on the backfoot with elections and a tough budget speech approaching in coming weeks.
The rand and emerging market currencies have been volatile this week with central bank decisions taking center stage and rocking the boat.
The rand proved to be much weaker than its counterpart currencies, having dropped over 2%.
USD/ZAR started off seeing levels of R14.82/$ on Monday and has increased sporadically since Tuesday, we are likely to see the pair test levels of R15.20/$ – R15.25/$.
The delta variant is still making it’s way through the US after the long-awaited US GDP showed that the nation had it’s slowest growth in the economy since 2020.
In contrast, US initial jobless claims fell to a 19-month pandemic low, coming out to 281,000 from 291,000 the previous week.
As a result the bias is that we will see higher levels on the dollar, seeing that jobless claims in the US has come back much lower than what was initially anticipated for the third consecutive week in a row.
Eskom has significantly contributed to the stunted economic growth which South Africa is currently facing and it has been said that we are most likely to see a total collapse in Eskom.
Investors remain weary of the status of the rand as Eskom continues to leave us in the dark and the fact that the budget speech as been moved to the 11th November due to elections has definitely left bidders on the fence.
We expect the dollar to dominate next week until a technical retracement occurs.
With Monday being declared a local public holiday, we expect that the dollar’s price action will do it’s utmost to get ahead of the rand in the markets.
The rand will have to play catch up on Tuesday.
USDZAR remains on an upward trend and if market players continue to push in a bullish pattern, we are will see the pair touch and break through R15.25/$ previously seen in September and go up to R15.35/$.
The second outcome may be that if we fail to break R15.25/$, then a correction back down to R14.85/$ may pan out over time.
The President of the ECB has decided to keep the eurozone’s interest rates unchanged. ECB president Lagarde has made us aware that inflation is here to stay for much longer than expected.
This is backed by the surge in energy, gas and oil prices which are extremely high at the moment. The ECB has set to ease from tapering it’s bond-buying scheme. Anticipating that the EUR will remain on the softer side – although the US has poor GDP growth, the EUR is still weaker than the dollar due to good jobless claims data.
We opened around R17.66/€ this morning and could see levels of R17.85/€ for the highs of the day.
We are moving in an upward trend on EURZAR at a gradual pace, expectations are that the lowest levels we will see from the pair is around R17.50/€ for the week ahead.
Most big banks are hiking their interest rates in the UK which will most likely result in owners suffering from soaring mortgage payments.
Following a high demand in energy and supply chain issues, it is expected that this could be the highest interest rates in 30 years.
Financial ministers have also upgraded the UK’s GDP prediction to 6.5% for the year and raised spending to reduce borrowing in the Country.
We expect that the GBP/ZAR pair will touch highs of R21.05/£. Breaking higher will open the path to R21.15/£ and R21.25/£, falling lower after this surge will likely place the pair in the range around R20.85/£.
Technical levels we are watching for the upcoming week:
- High – R15.35/$
- Support – R15.05/$
- Low – R14.85/$
- High – R17.90/€
- Support – R17.68/€
- Low – R17.55/€
- High – R20.35/£
- Support – R20.08/£
- Low – R19.90/£