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Daily analysis 02.05.2013

, Autor:

Marcin Lipka

Fears of weaker data from the U.S and more dovish statement form the Fed had weighted on the dollar even before the actual data was published. Today we have a crucial ECB rate decision. The zloty was weaker on Wednesday even though EUR/USD rose. The PLN could have been under pressure from Slovenia rating cut and fears of weak Polish PMI reading.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • 9.00 CET: PMI from Poland (survey 47.8; actual data 46.9)
  • Final PMI readings form the Euro-zone, Germany and France
  • 13.45 CET: ECB rate decision (survey: cut of 25 bps to 0.5%)
  • 14.30 CET: Mario Draghi ECB chief press conference
  • 14.30 CET: weekly jobless claims from the States (survey 345K)

Weak data from the U.S, new sentences from the FED, EBC meeting

Despite that most European markets had a day off yesterday, U.S. and U.K markets kept the adrenaline high in investors' blood. Firstly the EUR/USD jumped over 1.3200 on Wednesday. It was not a direct reaction to weak economic data but more an anticipation of worse-than-expected macro reports and FED's statement. Moreover, after the readings were released the EUR/USD corrected from the highs. The similar situation was after the Federal Reserve statement hit the wires. However, in my opinion it is worth to point out an important sentences which was added by the Committee. It states that“ The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes”. At a first look the message seems to be neutral, but regarding the market anticipation of reducing QE3 in 4th quarter, it seems to be quite dovish, because virtually no one expected a possibility to increase asset purchase operation. It can significantly weigh on the dollar especially in case of weak NFP data (tomorrow).

Finally today we the ECB rate decision. On the market there are so many scenarios that is is hard to keep up with all of them (including a 50 bps cut or leaving the rate unchanged will depreciate the euro). Trying to organize all the rumors in case of 25 bps cut I would not see a EUR/USD spike , but rather calm reaction and patient before Friday's NPF data (especially having in mind FED statement). When there is no cut the EUR should appreciate even by 100 pips which also can be supported by some unconventional measures for SMEs.

The zloty didn't take advantage of EUR/USD rally. PMI the lowest in 45 months

The Polish currency failed to gain some ground despite EUR/USD rise on Wednesday. A kind of excuse for the zloty could be Slovenia's downgrade to junk by Moody's or weak global Eco data which put pressure on stocks. However, it is also worth to note that the forint (which is supposed to be more sensitive to the sovereign issues in the region) gained some ground. Today we already received PMI index from HSBC and Markit. It turned out that the reading was at 45 months low (http://www.markiteconomics.com/Survey/PressRelease.mvc/0b10bec9fd124202bab7c47297734800 ). As HSBC economist for CEE region Agata Urbańska points out “Weak activity data and weak leading activity indicators matched with below-expectations inflation will keep up pressure for further interest rate cuts”. The sentence perfectly matched market reaction which pushed 10 year yeilds to record-low levels (10bps drop to 3.17%). The pressure to cut rates (both form the market and the economy) in Poland has been constantly rising and it is quite possible that we will see a decrease of 50 bps in June to 2.75 on the refi.

Expected levels of PLN according to the EUR/USD rate:

EUR/USD 1.3050-1.3150 1.3150-1.3250 1.2950-1.3050
EUR/PLN 4.1300-4.1700 4.1300-4.1700 4.1300-4.1700
USD/PLN 3.1400-3.1800 3.1200-3.1600 3.1700-3.2100
CHF/PLN 3.3700-3.4100 3.3700-3.4100 3.3700-3.4100

Expected GBP/PLN levels according to the GBP/PLN rate:

GBP/USD 1.5450-1.5550 1.5550-1.5650 1.5350-1.5450
GBP/PLN 4.8900-4.9300 4.9100-4.9500 4.8700-4.9100

Overall technical situation on the analyzed pairs:

EUR/USD matched its first target at 1.3200. The next one is around 1.3300. The situation on the Polish pairs hasn't changed much expect buy signal on the CHF/PLN.

Technical analysis EUR/USD: moving above 1.3200 confirms the bullish sentiment on the main currency pair. The next crucial level is 1.3300 (strong resistance level which previously worked as support before the EUR/USD fall more then 500 pips – form 1.3300 to under 1.2800). If we move over 1.3300 then the pair should come back to the medium-term rising trend with target at 1.3700. The alternative scenario is a slide toward 1.3000.

Wykres

Technical analysis EUR/PLN: the move over 4.1600 last week resulted that the technical analysis supports a view with range trade between 4.15-4.20. The slide under 4.1200 will favors bears and rise over 4.20 bulls (the least probable scenario)

Wykres

Technical analysis USD/PLN: the pair hasn't moved over 3.2000 so the preferable scenario is bearish trend with the target around 3.06 in the medium term. On the other hand breaking 3.20 to the upside will favor bulls with the target at 3.2700.

Wykres

Technical analysis CHF/PLN: the move over 3.4000 generates a buy signal with a target at 3.4300 and 3.4700 in extension. The alternative scenario is comeback to the range trend – 3.33-3.40.

Wykres

Technical analysis GBP/PLN: Thursday's move from 4.86 to 4.93 did change the perception in the short term (form bearish to bullish). The target for the pair is 5.0000 and the probe to change the medium term sliding trend. On the other hand the slide under 4.84 will support the bears again.

Wykres

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