Fundamental - On the week, a majority of market focus will likely be placed on the SACOB business confidence report. Expected to remain around the previous reading of 99.1, sentiment is moderately bearish as the index report has been declining since hitting a high of 103.1 back in April. Lending to this bias was the previous report that suggested a higher interest rate environment on mounting inflation in the economy and climbing fuel prices had adversely affected trade as global demand had seemingly moderated in the near term. ...<See below for full story>
Technicals
The USD/ZAR has rallied to the 61.8% fibo of 7.5346-6.7006 at 7.2132. Daily momentum is strong to the upside as RSI is increasing and nearing 70. Additional resistance is at the 7/17 high at 7.2860. The near term may see a correction though as a 5 wave rally is visible from the 8/10 low at 6.7050. Initial support is at a trendline from 6.7450 at 7.0835. Fibo support begins at the 38.2% of 6.7049-7.2364 at 7.0339. Bearish divergence with hourly RSI at todays high (2.2369) supports the case for a corrective move lower.
Full Article
Gaining on the week, the South African Rand was hit with a bout of selling following an extremely disappointing trade balance report for the month. The bad news helped sellers of the underlying currency in taking the pair higher though the 7.1000 figure until consolidation above the 7.2000 handle. Now seemingly forming a double top, the currency may be ripe for another advance lower should the thinner schedule spark some positive interest.
On the week, a majority of market focus will likely be placed on the SACOB business confidence report. Expected to remain around the previous reading of 99.1, sentiment is moderately bearish as the index report has been declining since hitting a high of 103.1 back in April. Lending to this bias was the previous report that suggested a higher interest rate environment on mounting inflation in the economy and climbing fuel prices had adversely affected trade as global demand had seemingly moderated in the near term. However, the survey may be bottoming out in the August figure as growth is still expected to rise by a 4 percent clip. Preceding the report will be the Naamsa vehicle sales report. Expected to pullback slightly from last months new single month record, the survey is estimated to show continued purchases of automobiles, purporting economic growth as consumers remain uninhibited by higher crude oil prices as the valuation of the domestic currency climbs. Rounding out the week, traders will be privy to the net reserves and gross reserves figures. Both figures are expected to tick slightly higher as monetary authorities attempt to curb enthusiasm among speculators since the domestic rand strengthened to 6.87 last month. Given the volatility in the commodity and currency markets, the central bank has been aggressive in containing the strength to maintain orderly economic growth.
Inflationary data took center stage on the week with both consumer and producer surveys released higher. Following M3 money supplies that rose less than expected by 21.15 percent, consumer prices rose on all levels. The all items figure rose on the month by 1 percent, bringing the overall annualized figure higher by a whopping 5 percent, just below the extreme level of the central banks target benchmark. The overall metro and urban figure, as a result, topped out at 4.9 percent, above the consensus asking for 4.7. Pushing the limits that the central bank is comfortable with, the figure continues to purport further monetary awareness as central bank President Tito Mboweni strives to contain price increases between the 3-6 percent range previously stipulated. Subsequently, the higher level of consumer prices could be seen as resulting from the rise in producer prices, a figure which rose 8.1 percent on the annualized figure bolstered by a 1.7 percent monthly increase. However, comparable to any interest rate speculation, a wider than expected trade balance and dip in manufacturing activity held bulls at bay towards the end of the week. According to government reports, the trade deficit widened to more than double consensus expectations. Rising to 7.746 billion rand, the figure beats out the 3 billion expected and raises concerns over the gaps adverse effects on the economy. Additionally raising concerns over slower growth, manufacturing activity in the region dipped to a 59.8 reading against a previous 63.2. However, according to the Investec Purchasing Managers Index, conditions continue to remain positive as the figure is reflective of supported optimism.
Economic Releases for September 4 September 8
| Date | Event | GMT | EST | Consensus | Previous |
| 9/4 | Naamsa Vehicle Sales | 9:00 | 5:00 | -- | 56554 |
| 9/4 | Naamsa Vehicle Sales (YoY) | 9:00 | 5:00 | -- | 20.85 |
| 9/5 | SACOB Business Confidence | 9:30 | 5:30 | -- | 99.1 |
| 9/7 | Net Reserves | 6:00 | 2:00 | -- | $20.45B |
| 9/7 | Gross Reserves | 6:00 | 2:00 | -- | $24.16B |
USDZAR The USDZAR has rallied to the 61.8% fibo of 7.5346-6.7006 at 7.2132. Daily momentum is strong to the upside as RSI is increasing and nearing 70. Additional resistance is at the 7/17 high at 7.2860. The near term may see a correction though as a 5 wave rally is visible from the 8/10 low at 6.7050. Initial support is at a trendline from 6.7450 at 7.0835. Fibo support begins at the 38.2% of 6.7049-7.2364 at 7.0339. Bearish divergence with hourly RSI at todays high (2.2369) supports the case for a corrective move lower.
