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Daily analysis 12.07.2013

, author:

Marcin Lipka

A pretty calm session is behind us after late Wednesday turbulence. The EUR/USD did hold 1.30 level. China signals slower growth? Next week markets will be again focused on the Fed. The EUR/PLN is still above 4.30 with low volatility. The government will probably deal with the revised budget as early as in July.

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

  • After 20.45 CET: Fed President Charles Plosser and St. Louis Fed President James Bullard are scheduled to speak in Jackson Hole (CNBC info)

No major changes on the EUR/USD. China suggests a lower growth? The next week

The recent hours has brought some calmness to the markets. The EUR/USD was able to hold most of its gains and it has been traded above 1.30 since the Wednesday's/Thursday's spike. As I noted yesterday, the short-term bullishness should remain in place on the euro-dollar. In the longer term, however, the switch in ECB monetary policy to more dovish (forward guidance and expected rate cuts) combined with Fed's tapering perspective (no matter how smooth it will be the Federal Reserve will be more hawkish then currently) should put quite a pressure on the common currency. Additionally the growth perspective, even though less important for currency swings, and expected lower current account deficit (US is supposed to import less oil) will also help the dollar in the long run.

Yesterday there was some confusion regarding Chinese Finance Minister comments on GDP growth. As The Wall Street Journal reports Lou Jiwei said on US-China summit in Washington that “reaching this year's target shouldn't be too big a problem. But we also don't think there is any big problem with [a growth rate of] 7% or 6.5%." A Chinese Finance Ministers spokeswomen said that “Mr Lou's remarks on growth were incorrect”. Yao Wei in comments for the “WSJ” said that “The new leaders have a different view from the old administration, the have a tolerance for lower growth, the are reluctant to use old tricks like monetary easing and infrastructure investment to support growth as these have proved to have shortfalls”. There has been many rumors regarding the Chinese growth, but even the most recent IMF report (July) does not predict signs of a sharp slowdown. The IMF claims that China will growth at 7.8% in 2013 and 7.7% in 2014. On Monday during the Asian session (4 am CET) the Q2 GDP results will be published. In case of much lower then estimates (7.5% Bloomberg median survey results) reading we can expect a negative market reaction.

Today's session should be relatively calm. At the end of the day we have James Bullard (dovish, voting, noting too low inflation) speech at the Jackson Hole Economic Summit, but I don't expect any reaction from the investors. If the next week Chinese data turns out to be in line with expectations we should see a bullish EUR/USD at least until Ben Bernanke statements before the economic bodies of House of Representatives (Wednesday) and Senate (Thursday) are published.

The EUR/PLN is still high

The Polish currency does not want to gain some value. The EUR/USD rise and a slide on the 10-year local bond yields was not able to push the EUR/PLN under 4.30. Market participants do not believe in the recent sentiment improvement after Ben Bernanke comments, so they are still resisted to buy the zloty. An impulse to the PLN strength can be a further slide of 10-year US treasuries (sill traded above 2.5%). If it drops under under 2.4% then w can expect the EUR/PLN to slide under 4.30.

According to PAP reports Polish Economy Minister Janusz Piechociński claims that the government will deal with the budget revision as early as in July. The market expect the deficit will widen around 10 billion PLN. If the widen budget gap is in line with estimates we should not see any reaction on the zloty.

Summarizing, there is a low probability that we see some larger moves on the PLN today. The zloty should be traded around 4.32 level. In the following week it is possible that we can slide under 4.30 (unless the sentiment deteriorates). On the other hand a failure to slide under 4.30 can result in a swift move toward 4.40.

Expected levels of PLN according to the EUR/USD rate

EUR/USD 1.3050-1.3150 1.3150-1.3250 1.2950-1.3050
EUR/PLN 4.3000-4.3400 4.2800-4.3200 4.3100-4.3500
USD/PLN 3.3000-3.3400 3.2600-3.3000 3.3200-3.3600
CHF/PLN 3.4800-3.5200 3.4600-3.5000 3.4700-3.5100

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

GBP/USD 1.5050-1.5150 1.5150-1.5250 1.4950-1.5050
GBP/PLN 4.9900-5.0300 5,0100-5.0500 4.9700-5.0100

Overall technical situation on the analyzed pairs

The technical situation on the EUR/USD has changed. The bulls are in charge now. The USD/PLN generated a sell signal. Other pairs remain in their trends.

Technical analysis EUR/USD: the EUR/USD moved quite substantially yesterday. It broke many resistance levels and stopped around 1.32. The upside trend dominates now with target at 1.3200 and support around 1.3070. The next support is around 1.2950. If we fall under that level is should generate a sell signal with a target around 1.28

Wykres

Technical analysis EUR/PLN: the EUR/PLN remains in the bullish trend. The first target is 4.35 and the second 4.40.

Wykres

Technical analysis USD/PLN: a fall under 3.28 was a sell signal. The USD/PLN target is 3.18-3.14 now. A comeback above 3.34 again favors bulls.

Wykres

Technical analysis CHF/PLN: the sell signal was generated after falling under 3.48. The target is 3.42 now. Alternatively the rise over 3.52 should be bullish.

Wykres

Technical analysis GBP/PLN: we were close to generate the sell signal (falling under 4.97). The pair, however, rebounded from 50 and 200 DMAs. Therefore it should retest the 5.10 highs. Alternatively a fall under 4.97 should generate a sell signal.

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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