Daily analysis 12.03.2013

, author:

Marcin Lipka

EUR/USD consolidates again around 1.3000 mark. The next info from Japan building the pressure on JPY. The pound is waiting for the industrial production data. The Polish zloty is pretty resilient to the local developments (NBP inflation projection) and the Hungarian impact.

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

  • 10.30 CET: Industrial production from U.K. (survey +0.1% m/m and minus 1.1% y/y)

No resolution on EUR/USD. Interesting on JPY.

We are again starting the day around 1.3000 on EUR/USD. As I noted yesterday Monday and Tuesday can be crucial for the common currency. If we manage to initiate a move (only on the market sentiment) either upside or downside then the tendency can be continued during the whole week. That scenario is also supported by charts. A slight move can activate the stop loss orders and we can quickly move toward 1.28XX levels. On the other hand if bulls are able to activate the market then we can see the rise toward 1.32XX (on squeezing shorts). The different situation is on the yen. USD/JPY is soaring again (96.36 currently) and we are really close to the 100 level. The Japanese currency sales came after some rumors regarding additional easing. Reports claim that more QE will be pumped to the markets on a special BOJ meeting just after Haruhiko Kuroda is named the next central bank chairman. The scale of uncertainty is well described by Tsunemasa Tsukada, chief manager of forex and financial product trading at Mitsubishi UJF Trust and Banking Corp. He told the “Journal” that “Anything could happen. We don't know what is going to happen until it happens”. It is also worth to note that not only the weakness of the yen affect the USD/JPY. The move can be speed up by the dollar strength (by good eco data – similarly to the latest NFP). Also the speculation regarding the earlier withdraw form the QE3 can support the greenback.

The pound weakness.

It is hard to find any analysis that predict the sterling strength in the long run. The pound is racing with the yen on the G10 weakest currency. It does not mean that we will not see any short term rally. The good opportunity can be today's industrial report form U.K. Taking into account the bearishness, better-then-expected data can produce some relief rally (not exceeding 1.5000 on cable and 4.8000 on GBP/PLN). On the other hand if the report falls short of expectations the we can even expect the pound slide toward 1.4800 (4.7000 on GBP/PLN).

The Hungarian case and the inflation report put a limited pressure on PLN. However, it can quickly change.

The appointment of new Hungarian Central Bank chief (with close ties to Prime Minister Orban) last week and some controversial changes in the constitution (according to the Polish daily paper “Gazeta Prawna” for example: a ban for political party advertisement in the commercial media, compulsory first job in Hungary after free state-paid education, rules limiting the power of Constitutional Tribunal) put pressure on the forint. For the long time HUF (white line) was highly correlated with the zloty (yellow line), but since mid February we can see the zloty is freeing itself from the Budapest ties. It is possible that the Polish currency can finally withdraw from the widely used strategy (securing HUF holdings on the zloty). The PLN was also able to resist the pressure form the NBP inflation report. However, the significant inflation expectations reduction and slower economic growth can put pressure on the zloty in the future. The move can be initiated by worse-then-expected eco data and fuel the discussion on the rate cut (even before the July NBP estimates). Fundamentally there has been more reasons to sell the zloty then to buy the Polish currency. We can see the short term target at around 4.2000 which can be extended by a correction on the global equities.

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

EUR/USD 1.2950-1.3050 1.3050-1.3150 1.2850-1.2950
EUR/PLN 4.1200-4.1600 4.1200-4.1600 4.1200-4.1600
USD/PLN 3.1600-3.2000 3.1400-3.1800 3.1800-3.2200
CHF/PLN 3.3400-3.3800 3.3300-3.3700 3.3500-3.3900

Expected GBP/PLN levels according to the GBP/PLN rate:

GBP/USD 1.4950-1.5050 1.5050-1.5150 1.4750-1.4850
GBP/PLN 4.7300-4.7700 4.7500-4.7900 4.7100-4.7500

Technical analysis EUR/USD: the recent jumps on Eur/Usd has not changed the broader view. The bearish trend is still valid with the target around 1.2870-1.2840 (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: the slide toward 4.1300 confirms the bearishness on EUR/USD. It is worth to note, however, that if we stay the rise above 4.1500 the 50 DMA crossing 200 DMA (golden cross) can generate the buy signal and the pair can jump over 4.1900 what in result can generate a buy signal.


Technical analysis USD/PLN: the base case scenario is still 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 pair looks pretty stable now. Trading between 3.33-3.41 is neutral for the CHF/PLN and it is also the base case scenario. Breaking up the range trend should generate the buy signal and sliding under 3.3300 should attract bears.


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. In the short term the target is to breaking support on 4.7000 and the resistance is on downtrend line (4.7800).


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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