overview

US ADP job figures were weak but initial jobless claims show the critical Nonfarm payrolls may show a much better than expected pandemic low in unemployment for the US.
The rand remains in demand with commodities acting as safe havens but a shift may occur if the US job report impresses.

sa markets

Investors moved to commodities this week while waiting for clues of the US job market results, gold surged and gave the rand impetus to drop to lows last seen in a month against the majors.

Nerves kept the emerging markets on the up over a soft dollar, however yesterday’s initial jobless claims hinted towards a charging recovery within the job market despite new covid-19 surges.
With data in Europe and Asia disappointing, indications overnight show that the mood may shift back towards the dollar as markets digest the job report coming out later today.
The hype of a positive report may last a day or two until settling and markets moving back off technical shifts instead of fundamental sensationalism.

Markets are expected to shift somewhat erratically as we await the US job data and the reaction of markets before the upcoming ECB policy meeting next week will likely see nerves rise and push the rand against resistance levels on USDAR and EURZAR.

Locally, data released this week showed that if we remain borrowing at our current rate then the country’s debt should rise to 86% of GDP, with R205 billion spent on debt interest over the last year and not even principal debt amounts.
A focus for SA will be our SARB monetary policy meeting on the 23rd, where rates are expected to remain unchanged and monetary guidance will be taken apart with fine combs.

Technically – 2 weeks ago we were over R15.30 on USDZAR. The dollar may see gains back up to R14.50/$ today but these levels remain far better looking at recent highs. Looking at daily graphs we seem to have made a double bottom, failed to break under R14.30/$ and now may move back up over R14.50/$. However on a weekly timeline reveals the pair remains on a gradual downward move with impetus pushing for support around R14.30/$. Breaking below this or staying above will determine the pairs direction in the next 5 days.

european markets

Inflation increased by 3% in the EU comparing the current rate with where it was a year ago, this increase is the highest inflation reading in the Eurozone in 10 years. These figures were pushed up by multi-year rises of consumer prices in Germany and France. Supply chain issues and covid-19 restrictions remain hindering trade and are expected to relax next year however continues to cause economic disruptions presently.

Now focus shifts to how the European Central Bank will adjust their policy in regards to the inflation and whether there will remain mixed feelings amongst officials on whether to slow down bond purchases and exhaust their 1.85 trillion-euro emergency fund.
The ECB’s target for mid-term inflation is 2% and with the figures being well over this, pressure will now be on the officials to revise estimates and policy come the next meeting on the 9th of September.

This week presented a stark difference to the levels near R18.00/€ we saw two weeks ago, now EURZAR is within range to edge lower than R17.00/€ in the next week ahead. The pair dipped under the R17 mark yesterday but failed to touch the support of R16.88/€.
With the drastic drop on EURZAR, we may see a 50% retracement back up to R17.50/€ before we retest a possible break below R17.00/€ in the week ahead.

uk markets

Pressure remains on the UK as Brexit continues to restrict food supplies in the region. Business in this regard could be swept up by the Chinese, who is expected to take the opportunity away from the kingdom to provide help on chicken shortages to name a few.
Spotlight is falling more on current tax talks which are aimed at raising funds to pay for an overhaul in social care – a rise in national insurance will see 25 million British citizens pay extra tax.

Furthermore, despite a pushing of vaccines to 16-17 year old’s, the UK covid-19 numbers are rising of late and infections are seeing multiday highs as colder days approach the nation.

Technically, GBPZAR dropped more than 50 cents since Monday but failed to break R19.73/£ and now ranges around the pivot level of R20.00/£.
With the USD seemingly on it’s way back up, the GBPZAR may see a correction back up to R20.20/£, breaking this would see a move to R20.37/£.

Technical levels we are watching for the upcoming week: