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Daily analysis 03.04.2013

, author:

Marcin Lipka

Another all-time-highs on U.S equities and pretty good Chinese data have not been able to lift the euro before the Thursday ECB meeting. Today we have the ADP report and non-manufacturing ISM from the States. The pound is under pressure again? First in 5 years debt-to-GDP decline in Poland and 500 days of Tusk second term

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

  • ◦ 14.15 CET: ADP employment change (survey: 200k)
  • ◦ 16.00 CET: Non-manufacturing ISM from the States (55.5)

European economy, the U.S, China, ECB

European PMI data for the Euro Zone were a bit better then the preliminary report (survey 46.6; actual: 46.8), but the reading is still recessionary, and there are no signs of a recovery on the horizon. The market sentiment was also gloomy with a recored high unemployment which topped 12% for the single currency countries. Americans were not concerned with the Old Continent problems and were purchasing stocks again. The rally was fueled by better-then-expected readings form the production (survey: +2.9%; actual: +3%) and an upward revision of the last data. In results both major NYSE indicies closed at all-time-highs – Dow Jones (14662 points) and S&P500 (1570 points).

During the Asian session we got also some positive data from China. Published by HSBC bank and Markit the services PMI index rose to 53.5 from 51.4. In the commentary the bank notes that “Index picked up to a six-month high thanks to new business growth, suggesting that a broad-based gradual growth recovery in on its way.

Getting back to Europe investors on the currency market will be waiting for the ECB meeting results on Thursday. Only 2 out of 56 surveyed economists expect that the central bank will lower interest rates. It seems that the cut is not likely, so the key to the EUR/USD condition will be Mario Draghi conference and any references to the future monetary policy. Reporters will try to get answer from the ECB chief on expected recovery (delay means more probability for the cut) and inflation (below the target also suggests the cut). We can also expect some questions on Cyprus (seems to be lower concern now), especially that Draghi hasn't talked much about the problems in Nicosia. It is also possible that journalist will seek answers for the Italy issue and Draghi's meeting with Napolitano (maybe some optimistic remarks on that case?).

I still expect the EUR/USD to be under pressure till the Thursday conference. Also the technicals on the common currency favor bears. Some movement we can expect after ADP report (of course, less then after Friday's NFP). Much better-then-estimated reading (over 240k) can give some boost to the dollar and push EUR/USD lower.

Weak data from the U.K

The pound was not able to hold on 1.5200 levels and did slide on worse-then-expected PMI index (survey: 48.6; actual: 48.3) under 1.5100. To answer for the headline question, whether it is the end of the correction on cable, we have to wait until it moves under 1.5000 mark. A catalyst for a stronger move can be Thursday's data – BoE meeting (however, no additional QE is expected) and services PMI. On the GBP/PLN we still don't have indications on breaking the short-term bullish trend.

The zloty is slightly lower. Tusk and Rostowski on a success path

The Polish currency is slightly weaker then on yesterday opening (4.1850 per euro). The PLN is still under both global (weak EuroZone is leveled by strong U.S equities) and local (macro data and moves on the interest rates) influence.

Yesterday the government enjoyed a lucky coincidence (500 days of a second Donald Tusk term and decrease of debt-to-GDP ratio from 53.5% in 2011 to 52.7 in 2012). Taking into account the European economy and its political situation the info seems to be impressive. In the morning Poland was also “praised” by Moody's. “Poland's quick start to fulfilling funding requirements is credit positive” the rating agency notes in e-mailed statement obtained by Bloomberg. It is possible that in the near future Poland will get a credit worthiness upgrade (or at least positive perspective as in the Fitch case). This would help the zloty and bonds (already some reaction is seen).

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

EUR/USD 1.2750-1.2850 1.2850-1.2950 1.2650-1.2750
EUR/PLN 4.1700-4.2100 4.1600-4.2000 4.1800-4.2200
USD/PLN 3.2500-3.2900 3.2200-3.2600 3.2800-3.3200
CHF/PLN 3.4200-3.4600 3.4100-3.4500 3.4300-3.4700

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

GBP/USD 1.5150-1.5250 1.5250-1.5350 1.4950-1.5050
GBP/PLN 4.9300-4.9700 4.9500-4.9900 4.9100-4.9500

Technical analysis EUR/USD: despite a slight correction the technical situation hasn't changed. The goal for the EUR/USD around 1.2700 can be achieved even as early as till the end of the current week. Any rebound not exceeding 1.3000 should be used to open short positions.

Wykres

Technical analysis EUR/PLN: we are trying to initiate a breaking up move from the range trade. If we move over 4.1900 there is a chance to attack 4.2300 and in extension even 4.3000 level. The alternative scenario is opening short positions under 4.1500 (low probability). The base case scenario is still the range trade (4.15-4.19).

Wykres

Technical analysis USD/PLN: after a month the buy signal was generated (mid February, breaking 3.14 upside) we did finally reach the medium term terget of 3.2700. Another resistance levels are 3.30 (highs of mid November 2012) and 3.33-3.35 range. The alternative scenario is short positions after closing the day under 3.2200 (38.2% Fibonacci retracement level and 200 DMA).

Wykres

Technical analysis CHF/PLN: there is still a high probability that we continue the rising trend. The target for the franc is 3.48 (50% Fibonacci retracement level). The comeback to the range trade is possible after falling under 3.39-3.40.

Wykres

Technical analysis GBP/PLN: a slight weakness on the pound does not negate the short term bullish trend. The base case scenario 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

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

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