Daily analysis 06.03.2013

, author:

Marcin Lipka

The record high DJIA didn't spur any major move on EUR/USD. The common currency will be watching revised GDP data from the Eurozone and preparing to ECB rate decision on Thursday. Polish MPC meeting will be closely watched (decision, press release, and the conference).

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

  • 10.45 CET: BoE Mervyn King speech before the parliament
  • 11.00 CET: 4th quarter GDP form the Euro Zone (survey: minus 0.6% q/q; minus 0.9% y/y)
  • Usually between 12.00 CET-14.00 CET: Polish interest rate decision (survey: 25 bps cut to 3.5%)
  • 14.15 CET: ADP employment change from the States (survey: +170k)
  • 16.00 CET: Polish MPC press release and the conference
  • 20.00 CET: U.S. Federal Reserve Beige Book

Record high DJIA does not help the EUR/USD.

Yesterday one of the U.S equity benchmark rose to its all-time high. Dow Jones Industrial Average peaked at 14286 points will probably beat the result many times in the following months. Most analysts also expect that the broader S&P 500, which is now around 2% shy of its peak, will also exceed the levels from 2007. Market participants usually point out few elements which have been boosting U.S stocks – ultra dovish monetary policy, relatively strong American economy, and solid corporate earnings. However, the rise in the risk appetite does not correlate with EUR/USD moves. On Wednesday the common currency tried to generate the correction (on slightly better then expected PMI), but it was rather used to close some longs or open shorts. Today the market can also focus on revised GDP results. If the data is better/worse than estimates we can see some rebound/slide by 30-50 pips. The main event of the week for EUR/USD is still Thursday's ECB conference. If Mario Draghi is dovish tomorrow and will be concerned with falling inflation or growth, and will be suggesting the cut or negative deposit rates he can put a significant pressure on the shared currency. On the other hand if Central Bank chief is less dovish (will be trying to omit subjects mentioned above), then we can expect some short-term relief rally.

Better then expected non-manufacturing PMI didn't help the pound to gain ground. Today we have Mervyn King testimony before the parliament, and tomorrow decision regarding additional QE.

U.K. Services PMI beat the expectations (51.8 vs 51) and gave some hope to the longs on cable but the rebound was short-lived and used to open new shorts. Today the sterling will be closely watched during the BoE chief testimony before the parliament in any hints regarding the additional easing. According to the February minutes Mervyn King was one of three MPC members who suppoted the additional 25 billion of QE. Tomorrow's rate decision can either push the cable lower (if more easing is announced), or will give some rebound to the GBP (in scenario when no additional bond buying is injected).

Finally the Polish interest rate decision.

I have been focusing many times on the Polish MPC decision recently. I don't want to repeat all the possible outcomes but try to focus on the essentials. It is worth to note that today all parts of the “event” can be important. Firstly the interest rate announcement will be probably between 12.00 CET and 14.00 CET, then we have the press release (16.00 CET), and also at 4 pm Marek Belka conference starts. The base scenario is that the Committee lowers the benchmark by 25 bps and in the press release will indicate that it is ending the easing cycle (should not impact the PLN). Positive outcome for the zloty is leaving the rate unchanged (can push EUR/PLN toward 4.1000) with quite hawkish conference (can strengthen the zloty even further). On the other hand if MPC lowers the benchmark and the statement is dovish, then we can expect the zloty to weaken above 4.1500.

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

EUR/USD 1.2950-1.3050 1.3050-1.3150 1.2850-1.2950
EUR/PLN 4.1100-4.1500 4.1100-4.1500 4.1100-4.1500
USD/PLN 3.1500-3.1900 3.1300-3.1700 3.1700-3.2100
CHF/PLN 3.3400-3.3800 3.3400-3.3600 3.3500-3.3900

Technical analysis EUR/USD: the bearish trend is still valid and any rebound should be used to open shorts. The next support level is 1.2900-1.2840 (head and shoulder target, 50% Fibonacci retarcement level and 200 DMA). The comeback to the bullish trend is possible after moving above 1.3300 (currently low probability).


Technical analysis EUR/PLN: according to the technical analysis the break down from 4.1500 support is a strong bearish signal with the first target around 4.1200 and then the move toward 4.08-4.12. EUR/PLN also moved under 50 DMA and 200 DMA on Friday (selling signal). The alternative scenario is a rise above 4.1900 (low probability now).


Technical analysis USD/PLN: The base scenario is still (despite the recent downside correction) a move toward 3.24-3.27 (between 200 DMA and 50% Fibonacci retracement level). The comeback to the bearish trend is possible after sliding under 3.1200 (50 DMA).


Technical analysis CHF/PLN: the buying signal generated around 2 weeks ago is finally negated. Now CHF/PLN is waiting for new signals. Moving under 3.3300 will generate the signal to shorts and breaking 3.4100 should attract longs. Staying between 3.3300 and 3.41 is neutral for the pair.


Technical analysis GBP/PLN: the bearish trend on GBP seems to be strong and any rebound not exceeding 4.90 (23.6% Fibonacci retracement level and 50 DMA) should be used to open new shorts. The pivot point is around 5.00. Analyzing 5-year chart we can see that the target of the recent move can be set around 4.5000.


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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