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Daily analysis 24.07.2013

, author:

Marcin Lipka

The EUR/USD has ignored worse-then-expected data from China, but reacted positively on solid readings form Euro Zone. Future US Eco reports are key for the dollar performance. The next bullish session on the zloty is a result of the global sentiment. Belka and Chojna-Duch on interest rates.

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

  • 9.00 CET: preliminary manufacturing and services PMI from France (survey: 48.8 and 47.5 respectively)
  • 9.00 CET: preliminary manufacturing and services PMI from France (survey: 48.8 and 47.5 respectively)
  • 10.00 CET: preliminary manufacturing and services PMI from from the Euro Zone (survey: 49.1 and 48.7 respectively)
  • 15.00 CET: preliminary PMI for the US (survey 52.6)
  • 16.00 CET: New home sales form the US (survey 484k)

“Controlled” disappointment from China. Upbeat data from Europe. Reports form the US

On Tuesday we were slowly climbing on the EUR/USD and stayed over 1.3200 till the end of the session. The market was slightly disappointed by weak PMI from China. Collected by HSBC and Markit data showed that the manufacturing contracted at a faster pace (47.7 vs 48.2 previously). These are the lowest readings since 11 months. Investors are especially concerned by “faster decrease” of employment and new orders sub-indicies. However if we look at the comments made by chief Chinese HSBC economist Hongbin Qu it looks like a help is on the way. Qu writes that “As Beijing has recently stressed to secure the minimum level of growth required to ensure stable employment, the flash PMI reinforces the need to introduce additional fine-tuning measures to stabilise growth”. After recent comments form Chinese official it looks that market is getting used to a hypothesis that the if growth drops to the 7% range then there will be a stimulus from the government.

We have a completely different picture is in Europe. PMIs from France, Germany and the Euro Zone significantly beat the expectations both in manufacturing and in services. Readings are at multi-month highs and the Euro Zone flash manufacturing estimate exceeded 50 level (50.1) first time in two years. Chief economist, Chris Williamson wrote in the comment that “The best PMI [composite] reading for one-and-a-half years provides encouraging evidence to suggest that the euro area could – at long last – pull out of its recession in the third quarter”. Today investors will also be closely watching the data form the US. If the readings fall short of expectations then we can expect an additional pressure on the dollar. If we combine it with a stronger euro then we can see another more to the north.

Summarizing the data form Europe are giving some boost the EUR/USD. Generated in a specific circumstance bullish impulse can still be continued especially that solid PMIs also decreasing the odds for rate cuts.

EUR/PLN still close to the support. The rates will remain unchanged

We had another session when the zloty gained some value, but the 4.20 level still holds. If we get an additional sentiment improvement (for example form average US data), then we can expect the further slide on the zloty. Moreover if the support is broken then the slide can be continued further. There is also another lesson from the recent slide. The zloty came toward 4.20 level pretty quickly and the current appreciation can hold back future attempts to weaken the Polish currency.

Today we had two statements form MPC members. Both professor Marek Belka and professor Elzbieta Chojna-Duch were suggesting that the rates will remain unchanged for the longer time. Belka also told in an interview form daily paper “Rzeczpospolita” is concerned whether Poland can mange to grow at a faster pace then 2%.

Taking into the account an expected improvement in the Euro Zone and Polish economy there is virtually no chance for any decrease of interest rates. It is also visible on the 10-year bonds where the yields jumped to around 4%. This time, however, it is a positive sing and should not be seen as a threat to the PLN.

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 4.2000-4.2400 4.2000-4.2400 4.2300-4.2700
Range USD/PLN 3.1900-3.2300 3.1600-3.2000 3.2400-3.2800
Range CHF/PLN 3.3900-3.4300 3.3900-3.4300 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.

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.

Wykres

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.

Wykres

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.

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 singal .

Wykres

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.

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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