Daily analysis 23.07.2013

, author:

Marcin Lipka

An attempt to break 1.32 on the EUR/USD after worse-then-expected data from the US was unsuccessful. Bloomberg survey on QE reduction still shows September as the most probable date when the taper starts. Tomorrow PMIs from China, Euro Zone and US. Ashmore Group positive on Polish assets. Retail sales from Poland.

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

  • 10.00 CET: Retail sales from Poland (survey +1.1% y/y)

Positive sentiment remains. QE3 survey. Wednesday's data

On Monday we had two attempts to move above 1.3200 but both of them were unsuccessful. The impulse came form worse-then-expected existing home sales (5.02 million vs consensus around 5.25). A simple rule is still valid – weak data form the States means pressure on the dollar and strong Eco reports firm the greenback. However, it is worth to note that existing home sales is a weak indicator of future unemployment, inflation or GDP growth so the move on the EUR/USD was pretty bold. Additionally, as Bloomberg reports, Richard Moody chief economist of Regions Financial claims that “Demand is fairly strong, but this is where the inventory constraints come into play”. Moreover the median home price has risen 13.5% y/y, so the market is rather booming then contracting. As a result we can expect that any report, which is even not directly related with the Fed's taper conditions, maybe interpreted as a signal to buy/sell the dollar.

Bloomberg published a survey where 54 economists were asked (18-22 July, after Bernanke's Congress hearings) about their expectations regarding the start of asset purchase tapering. Half of them are still estimating that the QE reduction will start in September (10 billion will be cut from MBS and treasuries purchases). 28% expect that the bond buying program will be winding down from December. The October date is less probable because the Fed's meeting does not end with the conference (now market participants demand from Central Bankers to be as transparent as possible, so any decision should be immoderately explained...). So we can make an assumption that if investors push the Fed not to taper in September, then the next date will be December (3 months more of full QE is a high stake game).

It is worth to remember about Wednesday's PMI data. During the Asian session we have readings from China and then reports form Euro Zone and the States. The Chinese data have lost some of the significance after reports from the Chinese government that it will not allow the GDP growth to drop under 7%.

Summarizing the dollar is is still under pressure and the sentiment on the EUR/USD remains bullish. The probability of future rise is higher then fall.

EUR/PLN on key support levels. Retail sales. Ashmore Group on Polish assets

The zloty was not strong enough to push the EUR/PLN pair under 4.20 level, but the appetite form polish bonds and currency was quite strong yesterday. Today we have the retail sales reading. The local data has been recently ignored by the market so the similar case is expected today. Only a strong deviation from the survey can push the PLN higher (over 3% growth y/y) or lower (negative reading.

An interesting story was reported by Bloomberg today. Jan Dehn head of research in Ashmore Group, which invests on emerging markets, claims that the fund “have built positions (on longer-dated Polish zloty bonds) since the tapering discussions form the Fed”. He adds that “we like the Polish currency, the bonds, especially the longer-end of the bond curve”. Regarding pensions plans discussions and fiscal issues Dehn sees that they “raise a few questions” but Poland can “do this without me losing confidence in the country because it is starting off form a position of a considerable strength. Dehn comments shows quite a dissonance between the local comments (not governmental) on the current macroeconomic conditions.

Summarizing we can have another attempt to fall under 4.22 on the EUR/PLN but I don't expect that it can fell under 4.20 level. There is a higher probability of further zloty gains if we receive bullish PMIs from the Euro Zone tomorrow.

Expected levels of PLN according to the EUR/USD rate

Range EUR/USD 1.3050-1.3150 1.3150-1.3250 1.2950-1.3050
Range EUR/PLN 4.2100-4.2500 4.2100-4.2500 4.2300-4.2700
Range USD/PLN 3.2000-3.2400 3.1700-3.2100 3.2400-3.2800
Range CHF/PLN 3.4100-3.4500 3.4100-3.4500 3.4300-3.4700

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

Range GBP/USD 1.5050-1.5150 1.5150-1.5250 1.4950-1.5050
Kurs GBP/PLN 4.8900-4.9300 4.9100-4.9500 4.8700-4.9100

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

Technical analysis EUR/USD: longs are still preferred on the EUR/USD. The first target is 1.32 and another is around 1.33. Alternatively the slide under 1.2950 gives a sell singal.


Technical analysis EUR/PLN: we have reached the first target around 4.22. If the strong support around 4.20-4.22 is broken then the EUR/PLN can slump even toward 4.10-4.13. Alternatively the rise over 4.28 is a buy signal.


Technical analysis USD/PLN: A fall under 3.28 was a sell signal. The USD/PLN target is 3.18-3.14 now. A comeback above 3.30 again favors bulls.


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 singal .


Technical analysis GBP/PLN: the sell signal was generated after sliding under 4.97 with a target around 4.9 and in extension even toward 4.8. Alternatively a rise over 5.04 is an indication of bulls' return.


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 Sp. z o.o is prohibited.

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