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Daily analysis 22.01.2013

, Autor:

Marcin Lipka

Bank of Japan increased the inflation target to 2% and announced unlimited easing worth 13 trillion yen (146 billion USD) monthly, but the program starts in 2014. Today in focus will be the ZEW index from Germany which is suppose to set the sentiment till the Thursday's PMI data. Zloty is still under pressure from weak eco data. The President Komorowski and MPC member Andrzej Bratkowski statements will not influence PLN.

Macro data (CET- Central European Time):

  • 11.00 CET: Index ZEW (survey: 12 points)
  • 16.00 CET: Existing home sales (survey 5.1 million) from U.S

BOJ increases its inflation target. Unlimited QE starts in 2014.

Theoretically the Bank of Japan (BOJ) met the expectations. It decided to increase the inflation target to 2% and announced the unlimited asset purchase. However, the devil is in the details. Firstly investors were disappointed due to lack of certain date when inflation meets 2% target, and secondly (more important) the open QE will start at the beginning of 2014. Until 2014 the current easing program will stay in place (worth 101 trillion JPY and set at the last month meeting – up from 65 trillion in 2012). The yen strengthen around 100 pips (from 90 to 89) after the info hit the wires. It is reasonable that in short term the BOJ decision is quite bullish for JPY. However, on the other side the asset buying program is worth gigantic 13 trillion yen (146 billion USD) on the monthly basis. If we compare it with FED's QE (85 billion USD monthly) we clearly see that the easing is not only 70% larger then in the States but also the Japanese economy is worth about 1/3 of the U.S. (relativly Japanese easing is few times larger) In the longer term the decision should put pressure on JPY, especially when FED starts to withdrawing from its QE. It will also suppose to have positive effect on EUR and increase the value of emerging markets currencies (especially in Asia).

ZEW in focus during the European session.

After the news from Japan the European investors will focus on the ZEW report at 11.00 CET. The index (in theory) is suppose to “predict” the real economy performance 6 months in advance. Analyzing the last five years (chart at the bottom) we see that it succeed to anticipate the 2009-2011 recovery and 2012 slowdown (with false rebound at the beginning of 2012). If we get a solid reading (12 or above) we can expect some bullish move on EUR/USD and on equities. On the other side if the report is below 10 points it can result in further euro weakness.

PLN is still weak. Fears before the next week GDP report?

As I wrote yesterday the production report will be weighing on PLN until we get the GDP data next Tuesday. In the coming days investors will try to evaluate the impact from the recent data on the economy and on the MPC. Today Bloomberg published statements for the dovish member – Andrzej Bratkowski. He said that “without the further easing to 3%, the economy will stagnate at zero or 0.5% growth”. Bratkowski is however, isolated in his opinions and during the February MPC meeting we can expect at most a 25 bps rate cut (seems to be already priced in). The sentiment on the PLN will also not be changed by the President Komorowski view regarding the euro adoption. He claims that Poland should meet euro entry criteria by 2015 and decide on adopting the common currency after the general election due that year. The zloty should to come back to the global sentiment moves and slightly strengthen with better then expected data from Germany and further weakened if the data fails to meet the expectations.

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

EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
EUR/PLN 4.1400-4.1800 4.1300-4.1700 4.1500-4.1900
USD/PLN 3.1000-3.1500 3.0800-3.1300 3.1300-3.1800
CHF/PLN 3.3400-3.3700 3.3300-3.3600 3.3500-3.3900

Technical analysis EUR/USD: yesterday session has not changed anything. When we fall under 1.3200, we can expect that the slide will be continued to 1.3080 ( 23.6% Fibonacci retarcement level and 50 DMA) and then further toward 1.3000. According to the trend the investors should consider to use the recent weakness to open long positions.

Wykres

Technical analysis EUR/PLN: staying in the 4.1650-4.1800 range is bullish signal for the EUR/PLN. If it breaks the resistance the move toward 4.2100 is quite likely (highs from last August).

Wykres

Technical analysis USD/PLN: we are close to change the recent bearish trend. Breaking 3.1400 upside it can spur the medium term move toward 3.25-3.27. On the other hand slide under 3.1000 increase the chances for the bearish move.

Wykres

Technical analysis CHF/PLN: balancing around 3.3600 level shows the bears weakness. If we don't come back under 3.3300 the odds for coming back to the range trend (3.36-3.41) are rising.

Wykres


Wykres

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