Daily analysis 05.10.2012

, author:

Marcin Lipka

Today we will witness one of the most important data of the month – Non farm payrolls (NFP). The data will hit market at 14.30 CET and the analysts' consensus is around 110k.

Thursday was suppose to boost the volatility and emotions on the markets, but it turned out to be pretty calm and only strengthen the current trends. Neither ECB, nor FED surprised investors. The benchmark European Central Bank rate wasn't changed and Mario Draghi during the conference didn't say much. He only confirmed that the central bank is ready to buy bonds when the aid is requested.

Concerning the FED minutes all but one members of the committee were in favor of the new round of QE. In the protocol there ware no info about substitution of the expiring at the end of the year Operation Twist. Some market participants speculate that during the next FOMC meeting the new program will be discussed.

As usually during the NFP investors have to be cautious especially on the currency markets. Even if the reading will be in the line of estimates EUR/USD can be bouncing back and forth the 1.3000 mark.

Possible scenarios of NFP data:

1. If markets get hit by a worse reading (NFP<100K) the first reaction is suppose to be bullish for the EUR/USD, but if it worsens the global sentiment (Risk off mode) we can see USD getting stronger.

2. If markets get hit by a better reading (NFP>130K) the first reaction will bearish for the EUR/USD, but if it help the global sentiment (Risk ON mode) we can see USD getting weaker.

Focusing on the PLN we can clearly see coming back to the global sentiment. It was a little bit disordered by the correction on EUR/PLN (after strong selling pressure concerning the RPP rate decision). Today I am not expecting huge changes. The key moment will be NFP report.

Underneath the expected levels of PLN pairs with concerning EUR/USD moves:

EUR/USD Around 1.3000 Around 1.3100 Around 1.2900
EUR/PLN 4.0800-4.1000 4.0600-4.0800 4.1000-4.1200
USD/PLN 3.1300-3.1500 3.1000-3.1200 3.1800-3.2000

Technical EUR/USD: The rapid rebound from 23.6% of Fibonacci retracement shows the strength of the that market and suggests rise to around 1.3120. There is a slim chance we can see such levels today but it is a reasonable target for the next week. The Eurodollar is expected be above both 50 and 200 moving averages. Additionally in the next 10 trading days there is a chance we can observe crossing 50 days moving average with 200 days moving average (the golden cross) which is strong bullish signal. If we fail to go up the first support level is around 1.2900.

Technical EUR/PLN: the trend on EUR/PLN is still bearish with the target around 4.0200-4.0300. This level can be reached in the next week. If the correction occur it is suppose to be stopped between the 50 days moving average and the descending trend line (4.1000-4.12000).

Technical USD/PLN: similarly to the EUR/PLN pair the trend is downside. The target for the next week is 3.0800. If the falling trend speeds up we can see the breakout from the descending triangle what will provoke move to the 3.0000 level. In case of correction the closest resistance level is 3.18000.

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 Sp. z o.o is prohibited.

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