SOUTH AFRICA: SARB & NERSA Decisions On Radar, Tensions With Rwanda Escalate
- The South African Reserve Bank (SARB) is widely expected to extend its rate-cutting cycle and reduce the repo rate by another 25bp, but may wrap the decision in cautious rhetoric. The outcome of the Monetary Policy Committee (MPC) meeting will be announced during a press conference with Governor Lesetja Kganyago scheduled for 13:00GMT/15:00SAST. Our preview of the SARB's decision, including a summary of sell-side views, can be found here.
- The National Energy Regulator of South Africa (NERSA) is expected to announce its decision on Eskom tariffs for the next three financial years during a media briefing coinciding with the SARB's press conference. It is expected that the regulator could soften the blow from tariff hikes after Eskom's original request for a cumulative 66% increase in prices over 2025-2027 (including a 36% increase this year) triggered widespread backlash.
- President Cyril Ramaphosa reportedly warned Rwanda that "firing at South African troops is a declaration of war," after several SANDF peacekeepers were killed by Rwandan-backed M23 rebels in the Democratic Republic of the Congo (DRC). Rwandan President Paul Kagame responded by accusing Ramaphosa of misrepresenting their recent talks and noted that "if South Africa prefers confrontation, Rwanda will deal with the matter in that context any day." It is expected that the situation in the DRC will be added to the agenda of the ongoing cabinet legkotla.
- There was only limited communique from the recent meeting between Ramaphosa and Democratic Alliance (DA) leader John Steenhuisen, but Presidency spokesperson confirmed that the two politicians had lunch privately to defuse recent tensions, the meeting "went very well," and "there was no blood on the floor."
- Private sector credit rose by 3.83% Y/Y in December, undershooting the +4.13% consensus forecast, according to data released by the SARB. M3 money supply rose by 6.71%.
- Statistics SA will publish December PPI data at 09:30GMT/11:30SAST. Later in the day, monthly budget data for December will cross the wires at 12:00GMT/14:00SAST.
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EQUITY TECHS: E-MINI S&P: (H5) Bear Threat
- RES 4: 6194.19 1.236 proj of the Aug 5 - Sep 3 - Sep 9 price swing
- RES 3: 6178.75 High Dec 6 and key resistance
- RES 2: 6163.75 High Dec 16
- RES 1: 6014.44/6107.50 50-day EMA / High Dec 26
- PRICE: 5957.00 @ 07:22 GMT Dec 31
- SUP 1: 5918.25/5866.00 Low Dec 30 / 20
- SUP 2: 5811.65 38.2% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5784.00 Low Nov 4
- SUP 4: 5698.25 50.0% retracement of the Aug 5 - Dec 6 bull leg
A bear threat in the S&P E-Minis contract remains present and the latest move down highlights the end of the recent Dec 20 - 26 corrective bounce. An extension lower would expose 5866.00, the Dec 20 low and a key short-term support. Clearance of this level would strengthen a bearish theme. Initial firm resistance to monitor is 6107.50, the Dec 26 high. A break of this level is required to open key resistance at 6178.75, the Dec 6 high.
GOLD TECHS: Still Looking For Weakness
- RES 4: $2730.4 - 76.4% retracement of the Oct 31 - Nov 14 bear leg
- RES 3: $2664.5 - High Dec 16
- RES 2: $2726.2 - High Dec 12
- RES 1: $2637.3/2692.8 - 50-day EMA / High Dec 13
- PRICE: $2607.7 @ 07:22 GMT Dec 31
- SUP 1: $2583.6 - Low Dec 19
- SUP 2: $2564.4 - Low Nov 18
- SUP 3: $2536.9 - Low Nov 14 and a key support
- SUP 4: $2511.1 - Low Sep 12
A bear threat in Gold remains present. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low. MA studies are in a bull mode position highlighting a medium-term uptrend and this suggests that the latest sell-off is likely a correction. Initial pivot resistance is $2637.3, the 50-day EMA. A breach of this EMA would be positive for bulls.
BONDS: Bonds are in the Green heading into Year End
- Europe is closed and the US and the UK will have an early close as we turn the page on 2024.
- US Tnotes (TYH5) continues to see a decent recovery in Futures, right on the June High in Yield of 4.6357%, tested on the 26th December with a 4.6393% high on that day.
- Further upside continuation in futures will see the next immediate resistance in Futures at 109.08+ (4.48% in Yield), but the lack of liquidity will likely keep the contract fairly subdued, given that it has only traded 50k lots overnight and into the European session.
- There's no notable data, nor speakers for the session
