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Daily analysis 22.08.2013

, author:

Marcin Lipka

We came back to around 1.3350. on the EUR/USD. The Federal Reserve members are still undecided regarding the QE3 tapering. Positive PMI readings from China and the euro zone. The polish zloty is fairly stable and has been traded around 4.25 level.

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

  • 14.30 CET: weekly jobless claims from the States (survey: 330k)
  • 15.00 CET: preliminary manufacturing PMI from the US (survey 54.2)

No breakthrough from the Fed. Solid PMIs from the euro zone

The EUR/USD reaction on Fed's minutes clearly showed the market sentiment. Just after the FOMC data hit the wires the most traded currency pair was changing the direction many times, but the overall volatility was pretty low (plus/minus 20 pips). The Committee message was probably intentionally uncertain to prevent hefty swings (at least on currencies it worked). The overall message form the Federal Reserve is that all will depend on the incoming macroeconomic data with special focus on the employment (not only the unemployment rate or NFP but also the labor force participation rate and the numbers of those working part time for economic reasons). It will be also crucial how the inflation is shaped (especially the core one). Moreover, the other economic reports will be closely watched especially that the FOMC expects the economy will pick up speed in the 2nd half of the year (if it fails it can be a pretty strong argument to either extend the full QE or slower the pace of tapering). Strictly from the minutes I would note a part which directly relates to the asset purchase. “A few members [two or three out of 12 voting] emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases” (this is from dovish part of the Committee). “At the same time, a few others [two or three out of 12] pointed to the contingent plan that had been articulated on the behalf of the Committee the previous month, and suggested that it might soon be time to slow somewhat the pace of purchases as outlined in that plan” (the hawkish part). So around 5-6 members expressed their opinion, but the rest (also around 6) didn't present their view. It can suggest that they are still hesitating whether to start widening down in September or not. Therefore it confirms the theory that incoming data will be crucial.

We are getting more encouraging data from Europe and some stabilization signals form China. As Markit and HSBC reports the manufacturing PMIs form the euro zone and Germany exceeded expectations and rose to two years highs (52 points and 51.3 respectively). The Chinese data was also supportive (return to the positive territory – 50.1) but the export subindex still lags. A slight disappointment came from France (especially from the services) where the PMI dropped to 47.7 from 48.6 whereas the expectations were around 49.

Summarizing the market and the data were in line with the yesterday's base case scenario – no new message from the Fed and some improvement in the single currency area. The afternoon trading should be fairly calm and the EUR/USD will probably remain around 1.3350 in anticipation for new impulses.

Slight changes on the zloty

The global market hasn't set any new direction for the PLN in recent hours. Regarding the lack of impulses the zloty Polish currency has been traded in fairly narrow range. Today at 14.00 CET we are getting the minutes from the last MPC meeting. It is expected that the Committee will repeat what has been known for several weeks that the interest rates will remain at current level at least till the end of the year. Later in 2014 the rates will probably gradually rise but the pace will be highly correlated with the inflation and growth.e.

Summarizing I don't expect any major changes. The most probable scenario is a calm trading within a narrow range (4.23-4.25 per the euro).

Expected levels of PLN according to the EUR/USD rate

Range EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
Range EUR/PLN 4.2200-4.2600 4.2200-4.2600 4.2200-4.2600
Range USD/PLN 3.1700-3.2100 3.1400-3.1800 3.2100-3.2500
Range CHF/PLN 3.4200-3.4600 3.4200-3.4600 3.4200-3.4600

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

Range GBP/USD 1.5250-1.5350 1.5350-1.5450 1.5150-1.5250
Kurs GBP/PLN 4.8500-4.8900 4.8700-4.9100 4.8300-4.8700

The EUR/USD is still bullish. All Polish pairs are in bearish trends but some of them are getting closer to generate a buy signal..

Technical analysis EUR/USD: we moved above 1.3400 which should be a confirmation of the bullish trend. The target is 1.3700 now. The main support and pivot point is still 1.3200, but if the EUR/USD rises above 1.3500 the support/pivot will be moved to 1.3300..

Wykres

Technical analysis EUR/PLN: the trend is bearish until we break above 4.26 level. According to AT the current value should be used to open short positions with the target around 4.17 and in extension 4.10. On the other had if we rise above 4.26, the buy signal will be generated with the target around 4.35..

Wykres

Technical analysis USD/PLN: the trend is still bearish until we rise above 3.22. The current level should be used to open short positions. On the other hand if we move above 3.22 the buy signal should be generated with the target around 3.39..

Wykres

Technical analysis CHF/PLN: the trading around 3.40-3.,45 should be fairly neutral for the pair. If we slide under 3.40 the sell signal should be generated. Contrary if the pair rises over 3.45 the buy signal is generated with a target around 3.52.

Wykres

Technical analysis GBP/PLN: we are getting closer to generate the buy signal (after breaking 5.00) with the target around 5.10. Staying under 5.00 still prefers the short positions.

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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