Daily analysis 08.11.2012

, author:

Marcin Lipka

EUR/USD is testing the recent lows. Bears has used the turmoil after the election, weaker then expected data from Germany, pessimistic Eco outlook form the European Commission, and significant slide of the equity markets.

Wednesday was extremely interesting on the markets. Firstly investors were excited by Obama's reelection, and in consequences USD was getting weaker. The moves on equity markets were also positive what was clearly seen on the European indices and S&P 500 futures contracts. However, as time elapsed the mood was weakening. The sentiment was also under pressure from the macro news. The first blow for the Eurodollar came at 12.00 CET from Germany. The industrial production was much weaker then expected (est: (-0.8%); actual: (-.1.8)). Next around 13.00 CET the market received European Commission Eco report where the estimated Euro-zone growth was reduced to just 0.1%. At the same time the EBC chairman Mario Draghi claimed that macroeconomic situation in Germany is worsening at the slowdown is expected. All the news resulted in the 100 pips slide on EUR/USD in two hours. It has also affected the equity markets.

Greece approved the austerity package.

During the night investors received positive info from Greece. The parliament in Athens accepted the austerity package. Market participants who were betting on the EUR/USD rise were probably disappointed. The overall risk off sentiment was much stronger that the voting outcome what caused hardly any reaction on the common currency. Although we should still remember that if Euro-zone finance ministers approve the next tranche of bailout money for Greece and set some frames for the debt reduction it can spur quite a rebound on EUR/USD.

Press conference of the EBC chairman.

Today the main event will be the EBC conference after the rate decision. Most economists expect that the cost of money remain unchanged, so they will focus on the words from Mario Draghi. In my opinion the chairman will focus on the OMT program and will try to express that he is ready to use it whenever (having Spain in mind) is requested. Madrid will be probably forced by markets to ask for help at the beginning of 2013. Its borrowing needs will rise next year (from 192 billion EUR to 207 billion EUR in 2013), and the growth is going to be negative (-1.4%).

Rates down in Poland by 25bp. The next cut is possible in December.

We had also an interesting situation on Polish zloty. The EUR/PLN resisted EUR/USD downfall, rate reduction by MPC, and lower S&P levels. The PLN bears were not able to win until the MPC conference had started. Dovish comments from Marek Belka around 16.00 depreciated the local currency. Investors mainly focused on two sentences: „(Belka) sees rather significant chance of December rate cut”, and „Polish interest rate cut beginning of easing Cycle”. After this comments the PLN depreciated around 0.015 PLN. On the other hand the PLN was relative strong. If that set of events occurred several months ago, the PLN would probably weakened around 0.05-0.06PLN.

Expected levels on PLN depending on EUR/USD value:

EUR/USD 1.2750-1.2850 1.2850-1.2950 1.2650-1.2750

Technical analysis EUR/USD: the common currency stopped at support levels around 1.2730-1.2750 (200 DMA and 38.2 Fibonacci retracement level). The chances for the further slide are significant with the target around 1.2600 (50% Fibonacci retarcement level). The come back above 1.2950 will signal the bullish trend.

Technical analysis EUR/PLN. The break of 4.1200 resulted in the fast move toward 4.1450 (downtrend line). The generated yesterday signal should push EUR/PLN to at least 4.1700-4.1800 levels (200 DMA, and 38.2 Fibonacci retracement level).

Technical analysis USD/PLN. According to AT USD/PLN broke another resistance level. The closest target is around 3.27-3.29 (200 DMA and 50% Fibonacci retracement level). The come back to stronger PLN is possible under 3.1900.

Technical analysis CHF/PLN: the pair continues to move upwards. The closest resistance level is around 3.4700, where there is 38.2% Fibonacci retaracement level and 200 DMA. After breaking this level the test of 3.5000 can be expected.

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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