Daily analysis 27.11.2012

, author:

Marcin Lipka

Risk on sentiment thanks to deal on Greece. EUR/USD around 1.3000 mark, and EUR/PLN is trying to break 4.1000 support level. Slowly we will come back to the macro data and the fiscal cliff.

Macro data:

  • 14.30 CET: FED chairman Ben Benranke speaks
  • 14.30 CET: Durable goods orders (USA)
  • 16.00 CET: Conference Board (USA)

Deal reached, but lack of details.

The European finance ministers and IMF meeting ended again in the late evening hours. This time however, the deal was finally reached. Its details are close to the earlier Reuters reports. According to the Eurozone officials 44 billion EUR bailout tranche will be unblocked (mainly for banks recapitalization) and the debt to GDP ratio at the end of 2020 can be higher then previously set ( currently at 124%). Other ideas which are suppose to help Athens to recover from the debt spiral are 15 years repayment debt extension, lowering rates on the current loans, giving back the capital gains earned by central banks on the Greek debt (opposed by the Bundesbank), and also the bond buyback.. Unfortunately the officials didn't show any detailed document. We don't know how much savings each operation is suppose to bring. A kind of news were between the lines statements from German officials. Jens Weidmann, Bundesbank chairman suggested that if Greece works diligently on the austerity reforms it can “earn” in a few years a partial debt reduction. In the same way we can understand the yesterday’s statement form German finance minister Wolfgang Schauble. It is already known that mentioned ideas are backed by IMF and the European Commission. In summary it is clearly seen that there is huge determination to solve the Greek issues. It looks like Currency Union managers will set any agreement, but they don't want to be accused of debt forgiveness. The true is that most of 240 billion EUR bailout money (110 billions in year 2010 and 130 billion in 2012) will be lost sooner or later.

Market reaction.

Most of the data from the evening deal was already known. The only new reports are signals form the German official regarding the debt forgiveness case. There is no optimism explosion on the markets so far, but from the point EUR/USD bulls it does not have to mean a bad news. Investors can wait to the additional signals (better then expected macro data) and then generate the next upside wave.

PLN takes advantage from Greek deal.

The rising risk appetite pushing the the xxx/PLN pairs lower. Currently we are testing the 4.1000 mark on the EUR/PLN. The downside breakout can be successful if the EUR/USD and equity markets continue its bullish moves. Investors should also remember that apart from global news the crucial info for the PLN will be the Friday's Q3 GDP reading from Poland. Analysts' estimate is around 1.8% y/y. Any data above 2% can strengthen the zloty by 0.01-0.02 PLN. On the other hand the reading lower by more then 0.1% can weaken the PLN even by 0.03-0.04 PLN. The asymmetrical reaction is expected concerning the following reasons. Firstly it can be used as an excuse for the correction from recent strengths. Secondly the weaker economy in the Q3 can spur fears that in the next quarters the actual data can be even worse what in consequences will put pressure on the MPC members to lower interest rates faster and deeper.

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

EUR/USD 1.3050-1.2950 1.3150-1.3050 1.2850-1.2950
EUR/PLN 4.1100-4.0900 4.1000-4.0800 4.1200-4.1000
USD/PLN 3.1800-3.1500 3.1600-3.1400 3.2100-3.1800
CHF/PLN 3.4000-3.3800 3.3900-3.3700 3.4200-3.3900

Technical analysis EUR/USD: is still suggesting the upside moves and going long at levels above 1.2910 with the target around 1.3150. However, if it breaks 1.2900 downside it is possible to test the 1.2800-1.2740 (200 DMA and 38.2% Fibonacci retracement level).


Technical analysis EUR/PLN: EUR/PLN still fights with the 4.1000 support level. If EUR/PLN breaks it the next move should be toward 4.0800. On the other hand the upside move is suppose to be stopped at strong resistance level around 4.1250 (23.6% Fibonacci retracement level and 50 DMA.


Technical analysis USD/PLN: USD/PLN looks very technical. After breaking the support level around 3.1900 it strengthened by another 0.04 PLN to 3.1500. The next support level is around 3.12-3.13.


Technical analysis CHF/PLN:CHF/PLN broke the support around 3.41-3.4150. Currently we are around 3.4000 and according to the technical analysis the next support level is around 3.35-3.36 and this is the preferable direction for the franc to zloty pair.


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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