Daily analysis 24.10.2012

, author:

Marcin Lipka

EUR/USD has not resisted the selling pressure from the U.S markets and fell below 1.3000 mark.

This time the currency market was not able to resist the selling pressure from the U.S markets. Strong downside move on S&P 500 futures caused by disappointing Q3 earnings reports initiated the slide on EUR/USD and break the 1.3000 level. However, taking into account the 250 points slide on Dow Jones the fall on Eurodollar was not as rapid as some might have expected. There are two reasons standing behind a relative strong EUR/USD. Firstly it is the macro data due today and secondly the still expected aid request from Spanish government. The PMI data from China didn't disappoint. The HSBC report showed gain by 1.2 point comparing to the last month's data (49.1 vs 47.9 in September). The reading is below the 50 mark, which separates expansion from contraction, but the improvement is visible especially in the new orders index.

The most important data for the currencies will be published just after the European session start. If the German and Euro zone PMI is better and IFO does not disappoint, there will be a chance to come back above the 1.3000 mark. However, if the data is fails to meet estimates I expect the EUR/USD to test the Tuesday’s lows and eventually finish the day around 1.2900 mark. I don't expect any turning point in the FOMC statement. Bernanke's tone will be balanced even though the recent data from jobs and housing were much better then expected. He will probably confirm that record low rates will stay to mid 2015 and will warn about the consequences of the upcoming fiscal cliff.

Tuesday confirmed my expectations concerning the upcoming end of the low volatility on PLN and increasing probability to the upward move. The zloty was loosing even 0.04 PLN comparing to the previous day. There were to issues which caused the move. Firstly in was the worsening market sentiment, secondly much worse then expected retail sales (3.1% vs.4.5% Bloomberg estimates). However, if today's data shows much better then expected PMI and IFO readings we can come back under 4.1200 especially the view on Polish market is still bullish. Yesterday’s bond auction allowed to secure 10% of the government borrowing needs for 2013 and Polish bonds are bought also by large Asian asset management funds. According to Bloomberg the Kokusai fund purchased 360M USD of Polish bonds in October 2012.

Expected PLN value in relation to EUR/USD levels:

EUR/USD 1.2950-1.3050 1.3050-1.3150 1.2850-1.2950
EUR/PLN 4.1300-4.1100 4.1000-4.0800 4.1600-4.1300
USD/PLN 3.1200-3.1600 3.1500-3.1100 3.2300-3.1800
CHF/PLN 3.4200-3.4000 3.3900-3.3700 3.4400-3.4100

Technical analysis EUR/USD: the market did fall below 1.3000 mark and generated a strong sell signal. Only the comeback above 1.3040 negate the signal. If it does not happen the technical analysis shows the first target around 1.2890-1.2900 (23.6% Fibonacci retracement level and 50 DMA), and the second one is around 1.2740-60 (38.2 Fibonacci retracement level and 200 DMA).

Technical analysis EUR/PLN: the break the resistance levels around 4.11-4.12 and generated the selling signal for PLN with the target around 4.1700-4.1800 (38.2 Fibonacci retracement level and 200 DMA). Only the come back below 4.1000 will negate the signal.

Technical analysis USD/PLN: the USD/PLN stopped around key levels around 3.1800. It is higher probability that we break them and go around 3.2700. To negate the selling signal should strengthen below the 3.1500 mark.

Technical analysis CHF/PLN: the pair generated the strong bullish signal, and the first target is around 3.4600. To negate the Tuesday’s move it should fall below 3.3900 mark.

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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