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Daily analysis 16.08.2013

, author:

Marcin Lipka

High volatility on the EUR/USD during the Thursday's session. What caused the rapid reduction of short positions? Mixed data, capital outflows from the US, technicals or correlation shifts? Polish zloty, in line with risk aversion, weakened quite significantly in a light trading.

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

  • 14.30 CET: US housing starts and building permits (survey: 900k and 945k respectively)
  • 15.55 CET: University of Michigan Confidence index (survey 85.2 points)

Interesting swings on the EUR/USD

Until 19.00 CET, the session on the EUR/USD was in line with macro reports. The US published at 14.30 CET the lowest in 6 years jobless claims (320k), and the inflation was close to economists' estimates (1.7% y/y). It immediately pushed the most traded currency pair lower (by 60 pips) on concerns that tapering will begin in September. The sell-off was also visible on stock market and 10-year treasuries which soared above 2.8% (first time in two years). Another set of data was not so dollar bullish. At 15.00 CET it turned out that foreign investors sold $80 billion of US assets in June (40 billion of government bonds and 25 of equities). Later we got worse-than-expected industrial production (0.0% vs +0.3%) and the Fed Philadelphia fell short of expectations (9.3 points vs 15 estimated). However, after 16.00 CET the EUR/USD slided even lower and touched 1.3210. It was expected that the day would close around this levels. However, around 19.00 CET the EUR/USD jumped, and we swiftly moved above 1.3300. Around this hour there was no new news, and any other asset classes didn't improve much (bonds, stocks). We didn't also get any remarks from Fed members (Bullard finished his speech few hours later and wasn't eager to say anything new) and after three hours all the macro data should have been already priced in. An interesting explanation was presented on “MoneyBeat” (part of the The Wall Street Journal). Matthew Walter claims that the dollar current correlations can change. “Thursday's price action offers a clear example. The dollar is down against the euro and pound and the WSJ Dollar Index is off 0.66% just as The Dow Jones Industrial Average has slipped 1.5%”. The last hypothesis regarding the dollar goes to the technicals. The greenback “fell sharply on simultaneous stop-loss bying of EUR/USD at 1.3315 and GBP/USD 1.5600. Stop-loss buy orders tripped at 1.3315/25/35”.

Summarizing, no matter what was the real reason of the EUR/USD rise, investors should be quite cautious regarding the future moves. It is possible that we can either move over 1.3400 or slide even under 1.3200 is such an unstable conditions.

Weaker zloty

The zloty was not able to withstand the pressure from US bonds and equities slide and the EUR/PLN moved toward 4.23 (there was no relief when the EUR/USD soared above 1.3300). The Polish currency can remain under pressure even today and the rise around 4.24 is also possible. On the other hand I don't expect any major trend shift, and next week I will rather see a come back toward 4.20 then a rise above 4.26.

Today the base case scenario is a stable trading around 4.22 with a slightly higher probability of further zloty weakness then a slide toward 4.20 per the euro.

Expected levels of PLN according to the EUR/USD rate

Kurs EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
Kurs EUR/PLN 4.2000-4.2400 4.2000-4.2400 4.2000-4.2400
Kurs USD/PLN 3.1400-3.1800 3.1200-3.1600 3.1800-3.2000
Kurs CHF/PLN 3.3800-3.4200 3.3800-3.4200 3.4000-3.4400

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

Kurs GBP/USD 1.5250-1.5350 1.5350-1.5450 1.5150-1.5250
Kurs GBP/PLN 4.9300-4.9700 4.9500-4.9900 4.9100-4.9500

Overall technical situation on the analyzed pairs

The EUR/USD is still bullish. All Polish pairs are in bearish trends.

Technical analysis EUR/USD: the EUR/USD failed to move over 1.34 level. Currently we bounced back from the resistance, but the shorts will be preferred when we slide under 1.32 mark.

Wykres

Technical analysis EUR/PLN: the EUR/PLN slided under 4.20 level which supported the bearish trend. The next target is around 4.10-4.13. Alternative scenario is a buy signal when it rises over 4.26.

Wykres

Technical analysis USD/PLN:we slided under 3.15 on the USD/PLN what suggests that the next target is around 3.05. Alternative scenario is a buy signal when the pair rises over 3.22.

Wykres

Technical analysis CHF/PLN: the first target was reached at 3.42. The strong support is around 3.40. If it falls under 3.40 the next target is around 3.33. Alternatively a rise over 3.48 is a buy signal.

Wykres

Technical analysis GBP/PLN: the sell signal was generated after sliding under 4.97 with a target around 4.9 (already reached) and in extension even toward 4.8. Alternatively a rise over 5.00 is an indication of bulls' return.

Wykres

Solid data from Europe. Lockhart; US fiscal issues could delay tapering?. The zloty is around 4.20 per the euro.

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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