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Daily analysis 03.10.2013

, author:

Marcin Lipka

EUR/USD above 1.3600. The pair supported by information that came up around 14.00 CET - worse than ADP prognosis, a vote of confidence for Italian government and - most of all - the conference after the EBC meeting. No surprises from the Monetary Policy Council. The Polish zloty still stable with a timid desire to strengthen.

Macro data (CET- Central European Time).

  • The most important makro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
  • Between 9.00 CET and 10.00 CET: final services PMI reports for Germany and France. Services PMI also from Spain and Italy.
  • 14.30 CET: Weekly jobless claims (survey: 315,000).
  • 16.00 CET: Services ISM from USA (survey: 57 ponts).

Makro data. Draghi conference. Italy

EUR/USD managed to exceed the 1.3600 level what was the result of a number of factors in short time (which probably wouldn’t cause these moves by themselves). These were the conference of Mario Draghi, the President of the European Central Bank (not as dovish as expected), worse data from the labor market published by ADP (also a downward revision of the last month’s report) and resolving of the Italian political crisis, since the Berlusconi party decided to support Enrico Letta government. During the American session we went back to under 1.3600, although the late night publication of the service PMI from China (fromn the government, good data - the Index rose to 55.4 points) have let EUR/USD to meet the level of 1.3600 again.

As I suggested yesterday, EBC stood by its dovishreports and restrained from specific decisions - whether it’s the launching of the LTRO program (neutral for euro) or interest rates reduction (strong sell signal for th4e common currency). Obviously, Draghi confirmed that the central bank may use any of its tools if necessary (for example in case of the liquidity problems in Eurozone),sugeested that there has been a discussion over interest rates reduction and repeated presented in July forward guidance (meaning that the moeney cost can either go down or stay at the same level w foreseeable future. However, these dovish information are well known for few months, so their influence is limited. The question concerning the high EUR/USD rate, he was clearly not impressed by its growth (bullish signal for the euro). Similar impression was given when listening the tha answers concerning the inflation which this year and a year to come will be clearly below the goal (1.1% in 2013 and 1.3 in 2014). However, the EBC President claims to be according to the baseline scenario and, although it remains low, it is as expected.

Apart from the EBC report, EUR/USD were supported also by worse than expected ADP data (the report from September showed only 166,00 new jobs and in August the data was corrected from 176,000 to 159,000). Such low readings support the hypothesis of not giving up the quantitve easing until December (what would also confirm weak NFP in recent months) and additionally strengthen the belief that the tapering path might be the easy one. It is also worth mentioning that the prime minister maintained his power in Italy. In yesterday’s voting even Sergio Berlusconi supported him (as a result of a pressure in his own party).

The sum of all events above made EUR/USD go above 1.3600. Today is the day of the final PMI readings from Europe (rather limited influence), services ISM from USA and weekly jobless claims. In case there is no surprises, all should remain around current levels.

The zloty with no specific direction. RPP waits for inflation projection

It has been yet another day of rather unexciting EUR/PLN trade. The sum of the positve EUR/USD data showed the zloty slight support, however, we still remained around the level of 4.22 per euro.

The situation has not changed even after the conference of Marek Belka, the Head of Monetary Policy Council (RPP). Not only did it last very briefly, but also the Chairman refused to discuss the 2014 monetary policy. However, one can expect that September will bring more details as the new inflaltion projection will arive. So far there is no sign of interest rates increase until the end of Q2 2014.

In conclusion, the zloty should remain around 4.21-4.23 today with a slightly higher likelyhood of strengthening rather than weakening.

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

Range EUR/USD 1.3450-1.3550 1.3550-1.3650 1.3350-1.3450
Range EUR/PLN 4.2000-4.2400 4.2000-4.2400 4.2000-4.2400
Range USD/PLN 3.1100-3.1500 3.0800-3.1200 3.1600-3.2000
Range CHF/PLN 3.4000-3.4400 3.4000-3.4400 3.4000-3.4400

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

Range GBP/USD 1.5950-1.6050 1.6050-1.6150 1.5850-1.5950
Range GBP/PLN 4.9900-5.0300 5.0100-5.0500 4.9700-5.0100

The general technical situation of the discussed currency pairs:

We are getting near another goal on EUR-USD, which is 1.3650. The next one is two-year high and exceeding 1.4000. All PLN pairs are in bearish trends.

Technical analysis EUR/USD: the target set by AT is around 1.3650 and in the extension even 1.4000. Sliding below 1.3400 generates a signal to take long positions with the first target around 1.3200.

Wykres

Technical analysis EUR/PLN: the comeback over 4.22 is a bullish signal with the first target at 4.26 and the next is 4.30. The alternative sliding under 4.18 is a signal to take short positions with the target at 4.10.

Wykres

Technical analysis USD/PLN: the target for USD/PLN is still 3.05 (to which we were close). We are down more than 0.15 PLN since the sell signal was generated. Shorts are preferred until we rise above 3.15.

Wykres

Technical analysis CHF/PLN: we are currently at the downward sideways trend between 3.40 and 3.46. Going up or below this level gives respectively buy or sell signals towards this pair.

Wykres

Technical analysis GBP/PLN: the pair broke 5.03 and the sell signal was generated with the first target at 5.10 and another at 5.,20. Sliding below 4.97 is a signal to take long positions.

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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