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Daily analysis 15.11.2012

, author:

Marcin Lipka

Dovish FED's notes failed to significantly weaken the USD. The dollar was backed by Middle East tensions and fiscal cliff. Macro data and a chance for unlimited QE in Japan will set the direction of both the majors and the PLN today.

Macro data:

  • 11.00 CET: Flash GDP for the Eurozone
  • 12.00 CET: EBC Mario Draghi speaks
  • 14.30 CET: Jobless claims in the U.S
  • 14.30 CET: Empire State index
  • 16.00 CET: Philly Fed index
  • 19.20 CET: FED chairman Ben Bernanke speaks

FED switches Operation Twist to Bond buying program.

Due to the difficulty of interpreting the yesterday's weaker-than-expected economic data (worse retail sales in the U.S. was a result of the hurricane Sandy) investors waited for publications regarding the last meeting of the FOMC. The "minutes" can be divided into two main components. Firstly the Federal Open Market Committee wants to replace, expiring in December Operation Twist, with the treasury purchase program ($ 45 billion per month). Secondly the FED would like to abolish interest rate projection calendar (currently 0% -0.25% until mid-2015), and substitute it with index depending on inflation and the unemployment rate. Overall the Committee was pretty dovish during its 23-24 October meeting, especially that the new program would expand the Fed's balance sheet. Summarizing with the announced in September Mortgage Backed Security buying operation, the total quantitative easing will be $ 85 billion per month. When politicians deal with the fiscal cliff (which put pressure on stock market and strengthens USD), investors “ bring to mind” the aggressive action of the FOMC, what in result should weaken of the U.S. currency.

Japan will also have its unlimited easing?

Interesting information came today from Japan. Shinzo Abe, the opposition leader of the opinion polls winning party, claims that he is a supporter of unlimited quantitative easing by the Bank of Japan. Due to early elections plans, Abe may become the Prime Minister as early as in December. As soon as this information hit the wires both USD/JPY and EUR/JPY by 60-80 pips. Usually the weaker yen is an indicator of improving global sentiment (increase EUR / USD). This time the pressure from U.S markets stopped the reaction on the common currency.

Macro data comes back.

Today the market will be focused on macro data. The sentiment should be set up by the GDP data from Europe. If the Eurozone resists the recession the market will react positively. The similar case will be concerning the macro data from U.S. Better then estimated indicators should help to rebound the recently hammered U.S equities and therefore boost the Eurodollar.

PLN depended on global macro economic data and central bank speeches.

The Polish currency will also benefit form the better ten expected U.S and Eurozone macro readings. Yesterday's in line with expectations inflation data from Poland didn't influence the zloty. Both from global and local point of view it is worth to listen the central bank's chairmen. More important for markets will be the Ben Bernanke speech where he will be asked about the details of newly proposed bond purchase program.

Expected PLN rate according to the EUR/USD levels:

EUR/USD 1.2550-1.2650 1.2650-1.2750 1.2750-1.2850
EUR/PLN 4.2000-4.1700 4.1900-4.1600 4.1800-4.1500
USD/PLN 3.3300-3.2900 3.3000-3.2700 3.2700-3.2300
CHF/PLN 3.5000-3.4700 3.4800-3.4500 3.4700-3.4400

Technical analysis EUR/USD. Staying above the key support level improves the short term technical situation. It is possible that rebound will be extended up to 1.2820 (levels from the beginning of November). After the correction move it is still higher probability to test 50% Fibonacci retracement level (1.2600) and then 1.2475. The recent slides will be negated only when EUR/USD closes above 1.2900.

Wykres

Technical analysis EUR/PLN: the long fight with 4.17-4.18 resistance level weakens the bullish side. Before the next attract it is possible that EUR/PLN will move to 4.1500, and then again will try to breakout 4.17-4.18 with the further target around 4.23 (50% Fibonacci retracement level).

Wykres

Technical analysis USD/PLN: the lack of strength form bullish side is also visible on USD/PLN. It can even push back the pair to 3.2500. In the next few days it is more probable to breakout above 3.2900 and the test the 3.3300.

Wykres

Technical analysis CHF/PLN: similarly to EUR/PLN the stronger correction move is probable. Its target is around 3.4400. Then it is expected to come back to the bullish move with the test of 3.5000.

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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