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Daily analysis 21.10.2013

, author:

Marcin Lipka

The EUR/USD touched 1.37 level on Friday, but a short-term bullish trend can be close to the end. Bloomberg survey among economists is pointing the first QE reduction for March 2014. The Polish zloty is slightly weaker to the euro and is traded around 4.18 per the euro.

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

  • No key macroeconomic data today.

Too optimistic on the EUR/USD. Bloomberg survey

On Friday the EUR/USD briefly touched 1.3700 mark, but a perspective that we can move to two-year highs frightened bulls a bit, and they decided to wait for more dollar negative signals.

The current week does not have to be as successful for the EUR/USD as the previous one. Firstly we have the September jobs report tomorrow. The market tries to diminish its impact, but if the data is stronger then anticipated (survey shows 180k) and we get some upward revision (at least 50k), it is possible that the EUR/USD will experience a deeper correction. Another threat for the most traded currency is the data from Europe. In the previous months we received solid PMI reports. This time economists are also predicting a pretty good number with all readings (both German and French and both from manufacturing and services) above 50 mark. If that scenario falls short of expectations we can get an impulse for a correction (weaker data means more dovish tone from the ECB).

In the medium-term, however, the dollar should remain to be under pressure (at least till the end of the year) and at some point we can top the 1.40 level. The greenback will still be negatively affected by possible fiscal issues, and of course, extension of the QE. The most recent survey published by Bloomberg shows that economists estimate the tapering in March (a half year move from the recent projection which pointed September for the first QE reduction!). Market professionals also claim that we should expect only $25 billion asset purchase reduction till July (previously in mid 2014 the easing was supposed to be ended). The Federal Reserve will end the treasuries and MBS purchases in October 2014 according to the median estimate. If such a scenario gets more attention and the market tries to execute it, we should expect more dollar weakness and two-year-highs in the current quarter on the EUR/USD.

Summarizing, the current week should push the EUR/USD for a correction. The dollar will have an opportunity to gain some value from the Tuesday's payrolls and on the other side of the trade, the euro may weaken even before Thursday's PMIs and Friday's German Ifo.

The zloty is fractionally weaker

The Polish currency was eager to waken on Friday but we finally it ended the week around 4.1650. Today, however, the bearish attempt was repeated and we moved toward 4.18 per the euro. This level should be maintained till the end of the day. Much more excitement we can experience tomorrow. At 10.00 CET we are having retail sales reading from Poland (the impact should be, as usually, limited) and the NFP reading in the afternoon. In case of solid NFP data, we can rise on the EUR/PLN toward 4.20.

Summarizing the incoming hours should be pretty calm for the zloty and the EUR/PLN should be traded in 4.17-4.19 range. A slight pick up regarding the volatility is expected tomorrow around the payrolls news.

Expected levels of PLN according to the EUR/USD rate:

Range EUR/USD 1.3550-1.3650 1.3650-1.3750 1.3450-1.3550
Range EUR/PLN 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
Range USD/PLN 3.0400-3.0800 3.0100-3.0500 3.0700-3.1100
Range CHF/PLN 3.3600-3.4000 3.3600-3.4000 3.3600-3.4000

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

Range GBP/USD 1.5950-1.6050 1.6050-1.6150 1.5850-1.5950
Range GBP/PLN 4.9100-4.9500 4/9300-4.9700 4.8900-4/9300

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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