Skip to content

Daily Dose

Daily Dose

Good Morning,

On the wires…

  • Some European factories are being forced to shut down due to soaring global energy prices
  • Former Russian PM says the Baltic states ‘will be next’ if Ukraine loses its war against Russia
  • Former bookkeeper found guilty of stealing R11m in Covid-19 relief funds
  • Ramaphosa sticks to his guns on Mkhwebane’s suspension
  • England trounced 4-0 by Hungary in Nations League as Germany hammer Italy
  • Hamilton’s first win, Kubica’s harrowing crash – 3 classic races in Canadian GP history

Quote of the day…

“ Yesterday is but today’s memory, and tomorrow is today’s dream. “ – Khalil Gibran

The indicators…

Currency crackdown…

FXOne would like to thank Warrick Butler from Standard Bank for his contribution to the crackdown this morning.

 

Good morning

Current level: 15.9850/15.9950

Range yesterday: 15.9750-16.1700 and NY close: 16.0450

A couple of days of madness, followed by what has been a relatively quiet week so far, from an FX point of view, if of course you weren’t trading the Queen’s currency that is. The Great British Pound is about to be renamed as just the British Pound it seems with the potential for a further reduction to the British Ounce (If the rumours from old BoJo are to be believed). The Rand lost ground to a Dollar high of 16.1800 but rand out of steam long before the 16.32/35 resistance band, thanks in no small part to the abundance of mining revenue thrown our way. I know I keep harping on about it but the supply is incessant most days. These guys are sitting on Sauron’s stock pile it seems, only there is no dragon watching over it. They are able to dip their hands in at will apparently. You may even feel sorry for Sibanye, who have just wrapped up a multi-month’s long strike only to be faced with further mine closures due to flooding. They are missing out on the party big time (as evidenced by their share price).

Talking of shares, the fear of a 75bps move by the Fed tonight has almost been fully priced into the market. US equities (and their poorer cousins) have taken a beating and the S&P is in a real hurry to hit the 3,500 target. UST’s have also been sold off as quickly as the many LIV Tour golfers integrity. Ten year notes trading almost as high as 3.50% yesterday, only to fall off a little after the bears disappointment at a less severe PPI number in the land of the free (???). The fear of a Fed behind the rates curve and the potential for a hard landing IE: global recession is taking its toll and we all know that the main drivers of market value are greed (bulls) and fear (bears). It’s the bears turn at the trough now.

And so it is that we await tonight’s statement to see if the Fed believe they are still on the right track, or if they hit the panic button. I am not really sure which is the better option either, as both decision can be interpreted in a number of ways. For instance, a move to 75bps could indicate that they are wrong in their assessment of the inflation trajectory and therefore are trying to play catch-up. Not exactly confidence building. Alternatively, it could be seen as a strong play to rein in the bolting horse. I think the biggest thing at stake (use that for your first Wordle) is the reputation medal which in turn feeds the re-election block. With the next US election 2 years away, the ruling democrats have a lot to lose should the Fed push the economy to breaking point with over-zealous rate hikes. The thing is, we will only know in a year’s time if they were indeed over-zealous or not. Aah the joys of hind-sight. Sometimes its good to be the Minion and not the Gru.

So far the Rand has failed to trouble the scorers much below 16.00, with only a couple of quick peeks below this level, however with all the supply we have seen and a market that got ahead of itself maybe a little too quickly, there is still potential for a small shake out before tonight’s meeting. A break below 15.9500 could see a quick move to 15.80/85 but I will be sticking out my hand to grab some Greenback’s if that is the case. I still think the world in prone to panic versus build at the moment and so prefer to continue to err on the side of caution. A Fed move of 75bps tonight and we will be above 16.36 in no time at all especially in light of the local holiday tomorrow and what is guaranteed to be horrible liquidity. Friday is bound to be fun.

Good luck out there and have a good day and possible long weekend ahead

Support levels – 15.8500, 15.7200, 15.5800, 15.4000

Resistance levels –16.0500, 16.2000, 16.32/35, 16.5000              

On the radar…

  • All – Russia/Ukraine Crisis
  • US – Retail Sales
  • US – Fed Economic Projects
  • US – Fed Interest Rate Decision
  • EU – Industrial Production
  • EU – Trade Balance
  • EU – ECB President Lagarde Speaks
  • SA – Retail Sales

Did you know?

Kimberley in South Africa was the very first city in the Southern Hemisphere to have electric streetlights – it actually had electric streetlights before London did.

All the best,

Kyle

To subscribe to the Daily Dose, click here.

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email