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Daily analysis 20.06.2013

, author:

Marcin Lipka

The sell-off on EUR/USD, stocks, bonds and commodities after less dovish then expected Ben Bernanke conference. The weak zloty, high bond yields are the consequences of the global situation.

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

  • Preliminary services PMIs from France, Germany and the euro zone
  • Preliminary manufacturing PMIs from France, Germany and the euro zone
  • 14.30 CET: weekly jobless claims from the States (survey: 340k)
  • 14.58 CET: preliminary manufacturing PMI from the U.S

The Fed is not concerned with market pressure.

The Fed did disappoint investors yesterday. Market participants were not actually really concerned by the revised projections or slightly changed statement. They were led down by Bernanke's immunity to their pressure. From the May 22th markets wanted to show the Chairman that if he didn't extend the stimulus, the sell-off would resume. During the conference Ben Bernanke showed that the Federal Reserve is pretty resistant to the investors' pressure. He clearly said that he was not concerned with the bond yield rise (“due in part to more in more optimism”) or any other global market turmoil. On the other hand he emphasized employment, confidence or housing market improvement. The most important statement was that “ FOMC may moderate pace of purchase later in 2013 and may end purchases mid-year 2014” It confirms what I have been writing since May 23rd that September date is most probable to start the tapering. It was close to the market expectations, but investors wanted to hear something much more dovish (more inflation concerns, too few NFP, something which will justify more QE).

Looking at the matter from more distance way the Bernanke speech, regarding the longer term, was really balanced. He underlined the improving economy and therefore the stimulus is essential to growth and we will have to come back to more traditional monetary policy. On the other hand he emphasized that in case of more problems the FED is ready to act. For short-term investors it was much less to continue sell the dollar or buy stocks Getting back to the markets the EUR/USD was hit really hard. The fist hit came form the statement (around 30-40 pips). Then the conference pushed the EUR/USD under 1.3300. The move also was extended by weak data from China (PMI).

Summarizing the EUR/USD will be under pressure from the Fed statement and Ben Bernanke conference. It will be difficult to build another bearish bias for the dollar. Therefore we can move toward 1.3000 next week.

Wild ride on the zloty

Another time in recent weeks we were witnessing a strong sell-off on the zloty. At the beginning of the European session the EUR/PLN was briefly traded at 4.35 (with one-tick rises around 0.01-0.015 PLN). The similar situation w had on the bond markets where yields on 10-year benchmark rose 25 bps. Taking into the account a foreign investor perspective he could have lost on carry trade around 4% (2% on the currency and around 2% on the bond price fall) at the market openinig. Such fluctuations of the capital can make many investors pretty nervous...

When the zloty depreciate significantly there are opinions that the NBP will intervene on the PLN. However, the central bank usually waits until the situation calms down. Now we are quite far from the quiet market.

It is worth to observe at what level the zloty closes the current week. If on Friday we end the session over 4.32 then the path toward 4.40 is open. Today's U.S session will also be pretty important. If the S&P or 10-year treasuries recover most of the losses then we can expect the zloty to rebound and slide under 4.30 per euro.

Expected levels of PLN according to the EUR/USD rate

Kurs EUR/USD 1.3150-1.3250 1.3250-1.3350 1.3050-1.3150
Kurs EUR/PLN 4.3000-4.3400 4.3000-4.3400 4.3000-4.3400
Kurs USD/PLN 3.2500-3.2900 3.2200-3.2600 3.2900-3.3300
Kurs CHF/PLN 3.4800-3.5200 3.4800-3.5200 3.4800-3.5200

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

Kurs GBP/USD 1.5450-1.5550 1.5550-1.5650 1.5350-1.5450
Kurs GBP/PLN 5.0100-5.0500 5.0300-5.0700 4.9900-5.0300

Overall technical situation on the analyzed pairs.

The EUR/USD is close to the key support at 1.32. All PLN pairs have come back to the rising trends. It is expected that the volatility will last for longer.

Technicznie EUR/USD:The slide under 1.32 will give signal to close the longs or open shorts. The next support is expected around 1.30. Alternatively the strong resistance is set around 1.34.

Wykres

Technicznie EUR/PLN: the rise over 4.28 is a bullish signal. Breaking 4.32 should be then the next target is set around 4.40. Only the slide under 4.20 ends the recent rising trend.

Wykres

Technicznie USD/PLN: the rise over 3.22 is a strong buying signal. The target for USD/PLN is around 3.30. If the PLN weakness continues, then the next target will be around 3.35 and in extension 3.5

Wykres

Technicznie CHF/PLN: the target for the pair is currently 3.5 and in extension 3.6. Only a fall under 3.40 ends the rising trend.

Wykres

Technicznie GBP/PLN: rising above 5.02 was a buy signal with a target around 5.10. Alternatively a fall under 4.95 should be a selling opportunity.

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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