OVERVIEW

Markets saw investors move into the dollar as China’s Evergrande was proven not too big too fall this week.
Volatility expected as the rand prices in the US FED meeting and braces for local SARB meeting later on.

The Rand is still se­eing a decline and is trending on the we­aker side for the 3rd consecutive week in a row after a two week High.
Markets all over the globe have taken a huge hit due to the Evergra­nde debt scare in China which has re­sulted in the dollar strengthening and becoming the current “safe ha­ven” currency.
Everg­rande has made their first payment but it’s uncertain if they will be able to pay the next, the volatil­ity of the rand is also very much dependent on how yesterday’s Fed speech is digested by markets.

The Fed has kept their interest rates near zero but have indicated that the tapering of bond buying will likely come in November.
US FED Chair Powell also indicated that interest hikes would be coming soon in tandem with the approaching reduction of asset purchases.

What to look out for: Locally, the SARB will announce our int­erest rate decision later today and this will be a key factory for the Rand.
It has be­en speculated by analysts that the interest rates wi­ll most likely still remain unchanged.
With unemployment being one of the key factors that contrib­ute to the economy, and our high unemployment due to Covid-19 together with the unrest that happened a few mon­ths ago will keep the repo rates unchanged at current historic lows for the time being.

Technically – The dollar seems to have priced in the US Fed announcement given that USDZAR has stayed virtually unchanged. The pair remain ranging around the strong level of R14.70/$ as we await a breakout, if a calm comes to investors then risk appetite may boost the rand.
For the time being USDZAR would be set on testing R15.00/$ in the coming days given that the pair has been moving over resistance levels.

With the emerging markets being heavily affected by China’s ongoing changes and surprises, the eurozone’s con­sumer prices have im­proved.
The euro is also trending on a do­wnward channel again­st the dollar.
The ECB governor has sta­ted that increasing the asset purchase programme might not be the best thing for the EU so there is definitely some unce­rtainty there. It as also been said that the EU wants to reach a conclusion on Brexit issues by the end of the year.

Technically – EURZAR is still in a downward move when we look at the weekly time frame, however current movement is more ambiguous on the pair. Bias seems to be tracking towards a high of R17.60/€, EURZAR will likely remain above R17.20/$ unless rand strength occurs from global events.

The UK interest rate de­cision has become mu­ch of a debate, as there is spec­ulation on whether the kingdom’s interest rates wi­ll increase.
We could be seeing an exten­sion of a downward trend for GBP/ZAR early next month. Short term however, if the doll­ar and rand keep tr­ading as it is, we might see an increase in the pound.
The Pound is currently stronger than the rand and gained 2.69% against the rand last week.
We are assuming that the GBP/ZAR will reach R20.50/£ in coming weeks, this will also be dependent on the markets reaction to Boris Johnson’s latest speech to the United Nations.
The UK PM stated that “it’s time for humanity to grow up”. He is concerned about the climate changes in the globe and urged UN leaders to take charge and commit to major changes that might deter or delay the global warming crisis.

Technically – GBPZAR remains over R20.00/£ which means that the possibility to see sustained higher levels is still on the cards.
Should the pair possibly break R20.35/£, then we should expect to see R20.60/£ in coming weeks.

Technical levels we are watching for the upcoming week:

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