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Daily analysis 09.04.2013

, Autor:

Marcin Lipka

The EUR/USD is trading around 1.3000 after a calm session. Chinese data and Ben Bernanke speech slightly support the common currency. The yen is still under pressure. Earnings season in the U.S started on Monday. The pound is slightly weaker to the dollar. Polish zloty is significantly stronger to other major currencies due to capital inflow to bonds market. Nomura Bank “sees” PLN as a beneficiary of BOJ policy.

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

  • ◦ 10.30 CET: Industrial production from the U.K (survey +0.4 m/m and minus 2.8% y/y)

China, Ben Bernanke, Yen, Alcoa

Both Ben Bernanke speech and Chinese eco data weakened the dollar. However, the moves were not really significant and has not caused any major shift on the markets. News agencies have choosen one sentence from FED chairman speech during his presentation on banking system “Today the economy is significantly stronger then it was four years ago, although conditions are clearly still far from we would all like them to be”, but it was just enough to keep EUR/USD at the current level. Similar situation we were observing regarding the Chinese data. Both consumer and producer inflation was lower then expected, and therefore the government is able stimulate the economy in more aggressive way, and in result in can improve the overall market sentiment, what finally should be positive for the EUR/USD. The market is clearly waiting for the FED minutes (scheduled for 20.00 CET, Wednesday), which can show whether the Federal Reserve is concerned with 2nd quarter slowdown (yes answer should put pressure on the dollar and can result in another wave of EUR/USD rise). In case of “no answer” and expressing concerns of exit strategy and costs of QE, we may expect a stronger dollar and eome back under 1.3000

There is no major doubts regarding a trend on the USD/JPY. The Japanese currency weakened on the Asian session again, and was just shy of 100 mark. Soft yen should help to maintain the positive sentiment, and therefore increase the appetite for purchases of riskier currencies (for example PLN) The start of earnings season in the U.S may have a slight impact on the EUR/USD. Better then expected results (both on revenue and income) will probably not hurt the common currency, but I don't expect they will give EUR a strong boost.

The pound is slightly weaker. Industrial production data

The pound was softer around 50 pips to the dollar. There was no major reason which pushed the cable lower, but investors speculate about the weaker debt market and fears before today's industrial production data. We can expect a stronger move after the actual report is published (better = cable rise; worse = sterling slide). Regarding the GBP/PLN pair we did see a strong zloty appreciation to the pound. The move was a cumulation of two factors – global sterling weakness and overall zloty strength.

Strong zloty, record-low yields on bonds, Nomura about the PLN

We did see another day of heavy buying of the zloty and Polish government bonds. On the EUR/PLN we broke a support around 4.1500 and stopped at lower band of 3-month range trade close to 4.1200. There was even more action on the bond market where 10-year benchmark closed at 3.50% (a 30 bps slide since in two days). Both the move on the zloty and on the sovereign debt is still the aftermath of last week BoJ decision and weak NFP data form the U.S.

Nomura investment bank in a note published by Bloomberg claims that BoJ bond purchase make “AUD and a number of EM currencies such as MXN and PLN as the most direct beneficiaries”. It seems to be valid with the comments I published just few hours after Kuroda's decision to increase asset purchase (/eng/news/daily-analysis/daily-analysis-04-04-2013 ; last part of the PLN section). The zloty should stay at current levels at least till tomorrow's MPC conference after the rate decision (listen closely to the governor Belka words on possible further cuts in the future) and Wednesday's FED minutes.

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

EUR/USD 1.2950-1.3050 1.3050-1.3150 1.2850-1.2950
EUR/PLN 4.1100-4.1500 4.1000-4.1400 4.1300-4.1700
USD/PLN 3.1500-3.1900 3.1200-3.1600 3.1900-3.2300
CHF/PLN 3.3700-3.4100 3.3600-3.4000 3.3900-3.4300

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

GBP/USD 1.5250-1.5350 1.5350-1.5450 1.5150-1.5250
GBP/PLN 4.8300-4.8700 4.8700-4.9100 4.8100-4.8500

Technical analysis EUR/USD: we did move above 1.3000 so it changes the overall tendency. The next resistance level is around 1.3150 (50 DMA) and in extension 1.3300 (from the last slide started). The alternative scenario is slide under 1.2850 (200 DMA and 50 % Fibonacci retracement level) and extension of the bearish move toward 1.2700.

Wykres

Technical analysis EUR/PLN: in two days we managed to move form the higher bound of 3-month range trade to the lower one at 4.1200. Despite many sell signals generated by the technical analysis (both breaking down 50 and 200 DMA) we need to move at least to 4.1100 to confirm the signal of the slide toward 4.06 and to 4.03 in extension.

Wykres

Technical analysis USD/PLN: the slide under 3.22-3.21 (38.2% Fibonacci retracement level and 200 DMA) generated sell signal with the target around 3.1400, which actually was almost met yesterday. It is crucial whether we break 3.1400. If yes, we can expect in the medium term a move even toward 3.04. On the other hand if the support holds, then we should expect the range trade between 3.14-3.22.

Wykres

Technical analysis CHF/PLN: the rising trend has not been negated yet. We have to slide under 3.4000 to close the longs and think about opening shorts. The alternative scenario is slide under 3.4000 with targets around 3.36 and 3.34 in extension.

Wykres

Technical analysis GBP/PLN: a slight weakness on the pound does not negate the short term bullish trend. The base case scenario (short-term) is still move toward 5.0000 and an attempt to break it and change the medium term outlook. On the other hand a slide under 4.89 should be a trigger to close longs and under 4.85 to open new shorts (a come back to both short and medium term bearish trend).

Wykres

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