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Daily analysis 11.01.2013

, author:

Marcin Lipka

The EUR/USD jumped 200 pips on Draghi's comments regarding no discussions on interest rate change and eased tensions on financial markets. The positive sentiment was also seen on peripheries debt and U.S equities. On the Asian session Japanese Prime Minister weakened JPY again announcing fiscal stimulus package. The next week will be free of Central Bank influence and the attention will be focused on U.S. Q4 reports and macro data.

Macro data (CET- Central European Time):

  • No major macro data which can influence the global financial markets

Yesterday's Draghi conference can set the tone on markets for the following weeks.

Thursday's Draghi's statement can be a turning point for EUR/USD in the medium term. All the speculations regarding interest rate cut were dismissed. The ECB chairman repeated few times that the decision to leave the rate unchanged was unanimous. Additional element which supported Eurodollar were his comments concerning condition of financial markets. Draghi praised lower peripheries debt, stock market surge and low volatility. He also sees increasing chances that economy will improve “later in 2013” but the threats for GDP growth is still in place what is not allowing ECB to exit from non-standard measures. All the elements were bullish for EUR, and in result the common currency surged 200 pips in one day. The risk on spread to all asset classes with large moves on 10 year Spanish and Italian yields hovering around 2-year lows. The recent market development increasing the odds for move toward 1.3500 on EUR/SUD till the month end, especially that in two weeks the Eurodolla will be positioning for FED meeting. The FOMC, in my opinion, will lower the tone of recent quite hawkish “Minutes” and in result it will push EUR/USD higher.

Abe weakens JPY again. Next week in focus. PLN with more room for gain.

During the Asian session Japanese Prime Minister pushed USD/JPY pair lower again. He announced the new fiscal stimulus package worth 10.3 trillion yen (116 billion USD). The markets also speculates that the central bank will be supporting the government to weaken JPY with more QE and increasing the inflation target. Taking into account more then 200% debt-to-GDP level and another series of easing there suppose to be no surprise regarding upgraded levels for USD/JPY at the end of 2013. Morgan Stanley estimates that USD/JPY will finish the day at 100 level, and Societe Generale increased its target to 97 yen per dollar at the year end. I think, regarding recent development, that JPY will lose both “safe haven currency” and reserve currency status. The fundamentals then can in uncontrolled way weaken JPY, and 100 level will be just a short pause in the upside move. There is also increasing chance that carry trade will come back (using more yen) what in the effect can support PLN in future.

In the coming week investors will rest from central banks and fill focus on U.S earnings reports and macro data. For markets the crucial results come on Wednesday (JP Morgan and Goldman Sachs) and on Thursday (Citigroup, American Express, Intel and Bank of America. On the other hand regarding macro data markets will focus on GDP from Germany, and retail sales from U.S on Tuesday, Wednesday's industrial production on from the States. At the end of the week (Thursday) housing data from and Fed Philadelphia index will be published.

On the Polish market we had a light rebound on EUR/PLN (from 4.07 to 4.08). The strong move was observed on USD (from 3.12 to 3.08) but it was only the result of EUR/USD surge. In the coming week the zloty should take advantage from “risk on” sentiment and it is possible that we can test the year lows (4.05-4.02). Concerning quite intense discussion on interest rate in on Tuesday we can expect some moves from inflation report and on Friday from industrial production.

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

EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
EUR/PLN 4.0600-4.1000 4.0400-4.0800 4.0700-4.1100
USD/PLN 3.0500-3.0900 3.0100-3.0600 3.0800-3.1200
CHF/PLN 3.3500-3.3800 3.3400-3.3700 3.3500-3.3800

Technical analysis EUR/USD: The move strong move above 1.3150 is strong bullish sign. Currently we are at next resistance level (around 1.3300). It is possible that the common currency successfully test 1.3300 and we can move toward 1.3450 (last year highs).

Wykres

Technical analysis EUR/PLN: EUR/PLN stays inside the range trend (4.06-4.12) and until we stay between these levels the range trend is in place. If we break 4.06 downside, the move toward 4.02-4.03 is expected.

Wykres

Technical analysis USD/PLN: after breaking 3.1100 there is a chance that we will go toward 3.05-3.06 toward the next support set up in 2011 (3.00-3.01). The longs should be considered only after breaking 3.1600 upside (23.6% Fibonacci retracement level and 50 DMA).

Wykres

Technical analysis CHF/PLN: we are getting closer to 3.3600 level. The successful test of the support can spur the move toward 3.3200. The bonce back from 3.3600 will result in coming back to the range trade.

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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