Rand loses ground in early trade as it shows no sign of a breakaway

The rand was a touch firmer in quiet early trade on Wednesday‚ after US retail sales boosted the US dollar, but lost ground in early morning trade. In market trends Yesterday our concerns regarding the rather sluggish price action in the rand over the last few sessions and if this continues to remain the case, the longer that the rand fails to achieve any significant gains on the downside the less likely this will happen. A morning report stated that the rand continued to drift weaker but there was nothing to suggest this would extend into a major trend. Seems if the ZAR finds a top(weaker)of 8.30 then we could be sliding back into a lacklustre market until some new news is available. It seems like the US economy is starting to show signs of recovery.  This could mean that further QE is off the table for now. Contrary to the positive effects of a better US economy, the prospect of no further QE has put a dampener on the market. This morning the rand is currently trading at 8.1950, very close to the high this morning, EURUSD at 1.2325, the market now looking to make an attempt on the top end of the range of late around 8.2500, a breach of this will signal a fairly rapid move to 8.4000. I still think these levels should be used for some covering of importer demands, as the sovereign debt issue is still around and will eventually raise its ugly head and put the Euro under pressure.

Asia indices fall, USD rises

Asian indices fall as data showing Germany and France avoiding a contraction last quarter. The dollar rose against major global currencies after retail sales data in the U.S jumped 0.8 percent against market expectations for a 0.3 percent increase. Consumer Price Index (CPI) in the U.S, MPC meeting minutes and claimant count change in the U.K are the major events for today. In Great Britain, rise up to 6.300 is likely from 6.100 on July for claimant count change and no change is forecasted in the U.S for core consumer price index.

My Gut Feel

My gut feel is as per my report,I still think the ZAR is under more pressure to weaken as the sovereign debt issue is still a reality and as much as we think the US is starting to show some signs of growth, that will be short lived as they too have constraint band use QE to assist as does the Euro which will be under severe strain soon. This will cause risk aversion and emerging markets feel it first.