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Daily analysis 02.07.2013

, Autor:

Marcin Lipka

Better-then-expected PMIs form the peripheral Europe and weak ISM employment component kept the EUR/USD above 1.30. No major eco events is scheduled in today's calendar. The zloty is still in the consolidation around 4.32.Polish MPC rate decision is already priced in.

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

  • 16.00 CET: Factory orders in the U.S (survey +2%)

The market is waiting for Thursday and Friday.

We had fairly good PMI readings form Europe yesterday. Despite that we didn't see any immediate reaction on the EUR/USD, the data supported the common currency and helped it to stay above 1.30. In Spain the PMI rose to two-years-high and moved to the neutral territory (50.0 points). The data provider, Markit Economics, claims that “the improved performance was heavily reliant on export growth” (what can be interpreted as a sing of competitiveness return – author's note). The purchasing manager index was also better-then-expected in Italy – 49.1, and the highest since mid 2011. In the afternoon we received the ISM from U.S. The reading was “optimal” for the markets. The index came back above the 50 mark, but the employment component was disappointing (what is currently a positive sign both for stocks and EUR/USD, because it gives a hope for later QE3 tapering). In sum the volatility on the EUR/USD was pretty small, and it seems that the market is waiting for Thursday ECB rate decision (no change is expected) and Mario Draghi conference (he should praise some improvement in the European economy what can support the EUR/USD. On Friday we have the NFP data which can set the tone for the next week.

Around 16.30 CET William Dudley is scheduled to speak on economy. Despite that he is one of a key Fed official I don't expect any critical comments form him. He sounded really dovish last Thursday when he said that “ QE may be prolonged if economy misses Fed forecasts”. He added that “Fed will probably keep most assets for a long time” and “most FOMC don't see short-term rates rising until 2015”. Repeating the message form last Thursday should not influence the market.

The base case scenario for the EUR/USD is still trading around 1.3050. The Thursday Mario Draghi conference should be rather bullish on the EUR/USD. There is still a big question mark regarding the jobs data on Friday and the ADP report tomorrow will probably not give any clear hint.

The zloty is stable. Kotecki on the budget.

The macro data and a relative positive global sentiment didn't help the zloty yesterday. The Polish currency is still correlated with the U.S 10-years treasuries (high yields put pressure on the PLN). Foreign investors are still reluctant to return into EM assets (including the zloty). We will probably have to see a significant slide on the “10-years” (at least under 2.3%) to see the EUR/PLN under 4.28.

The government is clearly getting closer to the budget revision. Ludwik Kotecki told “Rzeczpospolita” that “budget revenue will fall 'at least several billion zloty” short of 2013 plan. The market, however, has been speculating about the shortfall at least for 2-3 months, and it is not the first time when a Ministry of Finance official indicate the a revision. Therefore the information will probably not significantly impact the zloty.

The interest rate decision (25 bps cut), and neutral MPC statement is suppose to be already priced in. The lack of a cut (low probability) could give a boost to zloty (but probably a short-lived and not larger then 0.02 PLN) Summarizing the zloty should be resilient to the local issues (either positive and negative). The PLN is still focused on the global issues (mainly U.S treasuries and the EUR/USD). I don't expect any major changes and the base case scenario is a range trade between 4.30-4.35.

Expected levels of PLN according to the EUR/USD rate

Kurs EUR/USD 1.3050-1.3150 1.2950-1.3050 1.3150-1.3250
Kurs EUR/PLN 4.3000-4.3400 4.3100-4.3500 4.2900-4.3300
Kurs USD/PLN 3.2900-3.3300 3.3300-3.3700 3.2500-3.2900
Kurs CHF/PLN 3.5000-3.5400 3.5100-3.5500 3.4900-3.5300

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

Kurs GBP/USD 1.5250-1.5350 1.5150-1.5250 1.5350-1.5450
Kurs GBP/PLN 5.0500-5.0900 5.0300-5.0700 5.0700-5.1100

Overall technical situation on the analyzed pairs.

The PLN pairs are still in the bullish trend. The EUR/USD remains under pressure with the target around 1.28.

Technicznie EUR/USD:the pair is still close to the 1.30 level. The buy signal will be generated after rising above 1.32. Any slide under the recent lows favors bears and confirm the target around 1.28

Wykres

Technicznie EUR/PLN:the situation is still bullish. The target remains 4.40. Only the slide under 4.28 should bring more bears and push the pair toward 4.22.

Wykres

Technicznie USD/PLN:the rise over 3.22 was a strong buying signal. The first around 3.30 has already been reached. If the PLN weakness continues, then the next target will be around 3.35 and in extension 3.50

Wykres

Technicznie CHF/PLN:we are trading around 3.50 now. The target is still around 3.60. The slide under 3.48 starts to favor the sellers.

Wykres

Technicznie GBP/PLN:the 5.10 target was reached. The next target is around 5.20-5.22. The slide under 4.97 should favor bears.

Wykres

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