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Daily analysis 07.02.2013

, author:

Marcin Lipka

EUR/USD is fairly stable before the ECB meeting. Today except the Mario Draghi conference the Spanish debt auction will also be in focus. In Poland we had a 25 bps rate cut. The MPC March decision will depend on economic developments and NBP projection.

Macro data (CET- Central European Time):

  • 12.00 CET: Industrial production from Germany (survey +0.2% m/m and minus 0.5% y/y)
  • 13.45 CET: ECB rate decision (survey 0.75%)
  • 14.30 CET: ECB conference

The market is waiting for the Spanish debt auction and ECB conference.

We had a fairly low volatility on EUR/USD yesterday. The market is clearly waiting for ECB conference. Until we get to the “main event” I would like to emphasis also the Spanish debt auction. The results will come at around 10.30 CET. Madrid will offer 4.5 billion EUR bonds with maturities from 2015 to 2029. It will be hard to repeat the results from January when we had bid-to-cover ratio between 2 and 2.5. However, if it happens EUR/USD can get some upside boost. The other concern from the debt market is the performance of 10 year Italian paper. On Wednesday the benchmark first time this year exceeded 4.5% mark on the strong rally in polls of former Prime Minister Silvio Berlusconi party. None of the analysts surveyed by Bloomberg expects the ECB to cut rates. However, all will be listen closely to Mario Draghi statements. Any indication that ECB is concerned with the euro strength or with weakness of the common market economy can be interpreted as a higher chances of the future rate cut and therefore will weaken EUR/USD significantly. In today's The Wall Street Journal Marco Valli, an economist with Uni Credit claims that “use of words like 'competetive devaluation' or 'currency war' would indicate that ECB is much more concerned about euro appreciation then we expect” On the other hand if Mario Draghi emphasizes 2H economic rebound, recent good data from German economy and will intentionally omit any remarks on euro value in can support the common currency (the situation form last month can be repeated when markets expected discussion regarding the cut, but according to Mario Draghi the decision was unanimous).

Polish MPC statement more hawkish then expected.

The PLN immediately reacted to erasing the sentence The Council does not rule out further monetary policy easing should the incoming data confirm”. EUR/PLN pair dropped from 4.1800 to 4.1550. However the later statements from MPC governor Marek Belka toned down the hawkish press release. Professor Belka claimed that the most important for the Committee will be the current macro data and the economic projection form National Bank of Poland. He also said that either leaving the rate unchanged or cutting it is equally probable. During the conference the zloty was weakening again and then ended the day close to the opening levels. Currently the market will be closely watching (usually ignored in the past) the macro data from Poland (especially that regarding consumer condition). Better readings should support the PLN and worse then expected data can further depreciate the zloty. Today we also have the result of debt auction. The news which will indicate that Poland secured 50% of borrowing needs for 2013 can strengthen PLN in the short time (more about this in yesterday's analysis).

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

EUR/USD 1.3450-1.3550 1.3550-1.3650 1.3450-1.3550
EUR/PLN 4.1600-4.2000 4.1500-4.1900 4.1800-4.2200
USD/PLN 3.0700-3.1100 3.0500-3.0900 3.0900-3.1300
CHF/PLN 3.3700-3.4100 3.3600-3.4000 3.3900-3.4400

Technical analysis EUR/USD: if it manages to come back above 1.3600 it can spur the rise to new record high levels. On the other hand if euro/usd falls under recent lows (1.3450) we can expect the slide to continue to 1.3350-1.3300 (levels of January consolidation and 23.6% Fibonacci retracement level).

Wykres

Technical analysis EUR/PLN: despite the yesterday's large moves the technical situation hasn't changed. The come back above 4.1800 favors EUR/PLN bulls again. The target then is 4.2100 and 4.2500 in extentions. On the other hand he second attempt to breach 4.1500 downside can be successful and in consequence favors bears.

Wykres

Technical analysis USD/PLN: the first resistance level is 50 DMA around 3.1150. The next resistance is 3.1400. The breakout of 3.14000 should change the trend and spur move toward 3.25-3.27. We should remember however, that the trend is still bearish and until 3.1400 is broken any level should be used for opening short positions. The medium term target is still 3.0000 and 2.9000 in extension.

Wykres

Technical analysis CHF/PLN: wednesday (similarly to EUR/PLN) didn't change the technical situation. Bears should be waiting until the CHF/PLN moves under 3.3300. Such a slide will initiate the sell signal with the target around recent lows (3.27). The longs are set to open buy positions above 3.41 and wait until 3.4800 is reached (50% Fibonacci retracement level).

Wykres


Wykres


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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