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Ramaphosa to Unveil Economic Recovery Plan

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USD/ZAR Price, Analysis and Charts:

  • President Ramaphosa to unveil 8 priority areas in the economic recovery plan
  • USD/ZAR showing short term consolidation around 16.50 and other tech levels to consider in the run up to the US election
  • Finance Minister seeks one week postponement to deliver the Mid Term Budget Policy Statement citing time frames of new economic recovery plan

Economic Reconstruction and Recovery Plan: Funding Remains Key

Tomorrow, President Cyril Ramaphosa is set to present the economic reconstruction and recovery plan to a special sitting of parliament, focusing on eight priority areas.

The plan seeks to address a number of longstanding economic issues that have been exacerbated by Covid-19 and paves a way forward as we adapt to the ‘new normal’ as society transitions to a reality of co-existence with Covid-19.

Ramaphosa briefly introduced some information on the plan to a two-day Cabinet lekgotla (meeting called by government to discuss strategy planning) on the 7th of October.

Eight Priority Areas of the Economic Reconstruction and Recovery Plan:

  1. Ensuring energy security
  2. Having a thriving industrial base that creates jobs
  3. Mass public employment programmes
  4. Infrastructure that meets NDP (National Development Plan) 2030
  5. Macroeconomic interventions from strengthening tax collections to tax holidays in vulnerable sectors
  6. Green economy
  7. Food security
  8. Reviving the tourism sector

However, funding economic recovery plan poses a potential challenge as the South Africa is already running a budget deficit, expected to be in the region of 14.6% of GDP. Thursday may provide further clarity regarding exactly how these initiatives will be funded, whether it will be via public or private investment or a combination of both.

USD/ZAR: Key Technical Levels

The USD/ZAR currency pair continues to trade beneath the descending trendline from a long term perspective.

USD/ZAR Daily Chart

USDZAR daily chart

Chart prepared by Richard Snow, IG

USD Forecast

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Taking a closer look at the 4-hour chart – using a technique called multiple time frame analysis – there is a clear consolidation pattern where price had traded around 16.5000 (shown in the grey rectangle).

Consolidation, in some instances, precede bouts of volatility and with the US being just under 3 weeks from presidential elections there may very well be an uptick in volatility as we approach election day.

What does the US presidential election mean for the US dollar

On the 4-hour chart, a close above the 16.7700 level could spark further selling of the Rand to a degree and may see the descending trendline come back into play as a form or resistance.

However, with talks of a stimulus package in the US moving in the right direction, the prospect of a multi-billion dollar cash injection may weigh even more on what is a relatively weaker dollar. A move below 16.5000 followed by a close below the 16.3000 may see the next level of support coming in at the swing low of 16.0830 before testing the 61.8% Fib retracement drawn from the January low to the April high.

USD/ZAR 4-Hour Chart

USDZAR 4 hyour chart

Chart prepared by Richard Snow, IG

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Finance Minister Requests Postponement of Mid Term Budget Policy Statement

Mr Mboweni has written to the Speaker of the national Assembly requesting to delay the Mid Term Budget Policy Statement by one week to account for recent developments, most notably, the economic reconstruction and recovery plan time frames.

If accepted, the statement will be presented on the 28th of October and not the 21st as originally planned.

Ensure you keep up to date with any last minute changes in economic news and events via the DailyFX Economic Calendar

Mr Mboweni faces a mammoth task as he is set to provide an update on government’s priorities over the next three years. In the supplementary budget in June, the minister already warned of a sovereign debt crisis if economic growth continued to stagnate.

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX





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Forex

AUD/USD Breaks September Low Ahead of RBA, Fed Rate Decisions

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Australian Dollar Talking Points

AUD/USD takes out the September low (0.7006) ahead of the Reserve Bank of Australia (RBA) interest rate decision on November 3, but the future implications of the US Presidential Election may influence the exchange rate following the interest rate decision as Congress struggles to pass another round of fiscal stimulus.

AUD Forecast

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Fundamental Forecast for Australian Dollar: Neutral

AUD/USD slipped to a fresh monthly low (0.7002) as the US Dollar advanced on the back waning investor confidence, and the RBA meeting may produce headwinds for the Australian Dollar as the central bank is expected to implement lower interest rates.

ASX RBA Cash Rate

Source: ASX

The ASX 30 Day Interbank Cash Rate Futures reflect a greater than 80% probability for a rate cut even though Governor Philip Lowe insists that “the recent Budget provided welcome further support to the economy, and the central bank may continue to utilize its non-standard tools as “members discussed the options of reducing the targets for the cash rate and the 3-year yield towards zero, without going negative, and buying government bonds further along the yield curve.

It remains to be seen if the RBA will deploy more non-standard measures ahead of 2021 after tweaking the Term Funding Facility (TFF) in September,but more of the same from the RBA may generate a limited reaction as officials “consider how additional monetary easing could support jobs as the economy opens up further.”

At the same time, the Federal Reserve may follow a similar approach at its interest rate decision on November 5 as the central bank vows to “increase our holdings of Treasury securities and agency mortgage-backed securities at least at the current pace, and the outcome of the US Presidential Election may largely influence the near-term outlook for AUD/USD as the Greenback continues to exhibit an inverse relationship with investor confidence.

As a result, current market trends may remain in place as the lack of urgency to pass another round of fiscal stimulus puts pressure on the Federal Open Market Committee (FOMC) to provide additional assistance, and the threat of a protracted recovery may push Chairman Jerome Powell and Co. to further stretch the limits of monetary policy as the Fed’s balance sheet climbs to a fresh record high in October.

With that said, the outcome of the US Presidential Election may influence investor confidence amid the future implications for monetary policy, and swings in risk appetite may continue to sway AUD/USD as Vice Chair Richard Claridawarns that “additional support from monetary—and likely fiscal—policy will be needed.”

AUD Forecast

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— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong





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WTI Crude Oil Sinks to Fresh Four-Month-Lows

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Crude Oil Price Forecast Talking Points:

  • WTI Crude Oil fell to a fresh four-month-low this morning.
  • This fresh low broke through range support that’s held for the better part of two months.
  • The sell-off has so far found support at a key Fibonacci level plotted around 35.66.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Crude Oil Sell-Off Breaks Range to Set Fresh Four-Month-Lows

The earlier-year break below the zero level looms large in Crude Oil prices, but, for the past two months, WTI has been in a fairly consistent range with about $4 of deviation from support to resistance. The support-side of that range was violated earlier this morning as sellers pushed prices down to a fresh four-month-low, eventually finding some support at a key Fibonacci level.

{{GUIDE| OILTRADINGFUND}}

The price of 35.66 is the 38.2% retracement of the 2020 major move, as taken from the CL2 chart. Given the outlier event of prices breaking below-zero in April, many crude oil charts show obfuscated long-term technical criteria. But, by looking at CL2, which is the next month’s contract rather than the current months, we can strip out that outlier event to, ideally, get a more clear look at what today’s moves mean in terms of the bigger picture. Normally, I’d be hesitant to embark on such retrofitting but, given the outlier event as well as the 50% level from that same Fibonacci study helping to set recent range resistance, I’m a bit more open to following CL2 than I might be otherwise.

Crude Oil Daily Price Chart (CL2)

WTI Crude Oil Daily Price Chart

Chart prepared by James Stanley; CL2 on Tradingview

Taking a shorter-term look at the matter, and Crude Oil prices are bouncing from that Fibonacci support into the prior zone of range support. The prior swing-low that was set yesterday, at around 37.32, could open the door for resistance plays for those looking to trade short-side continuation scenarios. Also of interest for resistance potential inside that zone of prior range support – the October 2nd low at 36.93 could also provide some usable context for bears.

Oil Forecast

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WTI Crude Oil Four-Hour Price Chart

WTI Crude Oil Four Hour Price Chart

Chart prepared by James Stanley; CL2 on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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US Election the Main Risk, BoE to Boost QE

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GBP/USDFUNDAMENTAL HIGHLIGHTS:

  • Resurgent USD Pressures GBP/USD
  • US Election the Main Risk, BoE to Boost QE

Resurgent USD Pressures GBP/USD

A marginal drop in GBP/USD to close week with losses stemming from a resurgence in dollar demand as global uncertainties pick-up. Idiosyncratic factors had been somewhat muted for GBP and I for one have rather enjoyed the small amount of headlines regarding Brexit as negotiations are in the tunnel phase. That said, there had been some reports signalling that progress had been made with both parties inching towards a possible early November agreement. In turn, this has helped EUR/GBP crack 0.90 with fresh lockdown measures in France and Germany also adding to the downside, thus the bias is to fade rallies in the cross. Next week, it is expected that both EU’s Barnier and UK’s Frost will come out of the negotiating tunnel on November 3rd and likely provide an update on the latest state of play.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -15% 8% -4%
Weekly -6% -17% -12%

US Election the Main Risk, BoE to Boost QE

The obvious risk in the very short-term is the US election, in which the outcome will guide sentiment, thus while there are key domestic factors for the UK, taking the specific events in isolation, volatility will be dwarfed by the election. That said, the Bank of England will be on tap, where expectations are for an increase in QE by £100bln. At the current purchase rate, a £100bln increase can see gilts until H1 2021. However, focus will also be on whether the committee has lowered the bar any further for taking rates sub-zero.

Gilt purchases

Lockdown Measures in London is a Question of When Not If

Another factor that GBP has to contend with is the continued rise in coronavirus cases with PM Johnson on under increasing pressure to implement fresh lockdown measures. In turn, with the r-rate in the capital showing little signs of easing, further measures in London is a question of when, not if.





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