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Daily analysis 14.05.2013

, author:

Marcin Lipka

EUR/USD is staying around 1.3000 but the downside pressure remains. Another ECB member statement on negative deposit rate. Today in focus the German ZEW index. Flash GDP reading from the Polish economy. The zloty is weaker again.

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

  • 10.00 CET: Flash GDP from Poland (survey: +0.2% q/q and 0.7% y/y)
  • 11.00 CET: ZEW index from Germany (survey: 40 points)

1.3000 level still in the game. ZEW in Foucs

Yesterday I noted that the market was waiting for “a reason” to fall lower. A catalyst could have been the early afternoon statement from Italian central bank chief. Ignazio Visco who told CNBC that the bank is technically ready for such action (similarly to recent remarks from Mario Draghi and Finnish central bank governor Liikanen). The market is slowly getting used to such opinions and there is also a rumor that it can be used by ECB to push EUR/USD a bit lower (kind of verbal intervention to make the EuroZone more competitive). Additionally the market has already “priced in” some of the probability for such a move (after Draghi's conference during the ECB cut) and now is waiting for the action (words are having less impact). So the reaction on Monday was fairly muted and the common currency is still around 1.3000.

The only major macro publication is German ZEW index. Economists predict that the indicator will rise to around 40. Similarly to the previous month I don't expect such a high reading. The element which supports the ZEW is record-high stock market, but the expected economic rebound hasn't come yet, so 40 level seems to be a bit too optimistic.

Summarizing the recent hours on the EUR/USD was more on the bullish side (no reaction on negative interest rates statements). It does not, however, crosses out that the EUR/USD will be under pressure in the following days or weeks (both form the weakening euro and stronger dollar).

Flash GDP report from Poland

Polish Statistic Office (GUS) has just published a flash GDP report. The data falls short of expectations with slower then expected growth at 0.1% (survey +0.2 q/q) and +0.4 y/y (survey: +0.7 y/y). It is also worth to note that the reading on 4th quarter was lowered to 0.0% from 0.1%. The PLN reaction has been pretty calm so far. Additionally the data is quite bad, but not catastrophic, so it lures bond investors who anticipate the further rate cut and therefore yield slide (price of the bonds to rise). I did write more about the subject in the analysis after the interest rate cut last Wednesday (/eng/news/daily-analysis/daily-analysis-09-05-2013 )/ The base case scenario is still the range trade between 4.12-4.20 with more probability to test the higher bound but with out breaching it.

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 4.1300-4.1700 4.1300-4.1700 4.1300-4.1700
USD/PLN 3.1700-3.2100 3.1400-3.1800 3.2000-3.2300
CHF/PLN 3.3300-3.3700 3.3300-3.3700 3.3300-3.3700

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

GBP/USD 1.5250-1.5350 1.5350-1.5450 1.5150-1.5250
GBP/PLN 4.8700-4.9100 4.8900-4.9300 4.8500-4.8900

Overall technical situation on the analyzed pairs:

Staying above 1.3000 is giving some hope to the bulls, but on the technical side the sellers are on better position. The USD/PLN generated the buy signal and CHF/PLN is trying to come back to the range trade.

Technical analysis EUR/USD: the bulls are defending the 1.3000 level and both 200-DMA and 50-DMA. The recent slight break down was a result of the bulls weakness so it supports the selling side with the target around 1.2800.

Wykres

Technical analysis EUR/PLN: recent EUR/PLN changes broadened the range trade (4.12-4.20). Breaking 4.1200 to the downside (200 DMA) should push the pair toward 4.10 and in extension to 4.05. A move above 4.2000 seems to be currently least probable.

Wykres

Technical analysis USD/PLN: the pair has moved over 3.2000 which has generated a buy signal with the target of 3.2700. The shorts should be again opened when the pair slides under 3.15-3.14.

Wykres

Technical analysis CHF/PLN: the slide on CHF/PLN has been paused . If we move above 3.3700 then the recent break down was false and the we should again remain in the range trade (3.33-3.40).

Wykres

Technical analysis GBP/PLN: the short term target for the pair is a move toward 5.0000 and an attempt to change the mid term trend to rising. The breaking above 5.0000 should initiate the move toward 5.1000. The alternative scenario is a move under 4.85 where bears should take the lead.

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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