Daily analysis 19.08.2013:
The EUR/USD is holding above 1.3300. Wednesday's minutes in focus. Some of EM currencies have been weakening significantly. The Polish zloty is under a slight pressure. Rumors on Rostowski dismissal don't help the local currency.
Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
- No major macro news is scheduled
The EUR/USD is still trading above 1.3300
The EUR/USD despite worsening global sentiment has been trading above 1.3300 level. Investors are not really eager to sell the euro cause they are still having in mind the Thursday's afternoon jump. As “MarketWatch” reports Richard Fischer told the Fox Business TV on Friday that “I think the market has come to realize there is no QE infinity and secondly... we're seeing better number in the economy”. The Dallas Fed president (non-voting, hawkish) also suggested that if he had voting right “would have voted for the central bank to start pulling back its $85 billion per-month asset purchase program at the last meeting in July” His remark on CNBC a few days ago were not so strong “We will have to see what the data is and the feeling is between now and the time we next meet in September”.
In the current week the main event should be Fed's minutes publication. The recent statement was quite dovish and it lacked a direct suggestions on tapering. I noted it in the August 1st analysis writing that “the FOMC more closely focused on inflation which is “persistently below its 2 percent target” and claimed that the economic activity “expanded at a modest pace” whereas previously the growth was named “moderate”. On the other hand if we get some details regarding the tapering (the pace?) then according to how the data is close to the consensus we can either see the slide or a rise (the first scenario seems to be more probable).
Some EM currencies are in strong depreciating trend. The case is especially valid regarding Brazilian real, India's rupee and South African rand. In three months they weakened to the dollar 15%, 12% and 7% respectively. Analysts have been suggesting for a long time that currencies with high current account and budget deficits, high inflation and unstable political conditions are prone to the heaviest losses.
Summarizing the EUR/USD is still pretty high. The pressure on the EUR/USD can increase before the minutes is released. However, if Fed's meeting was close to the statement outcome that it should help to most traded pair.
The zloty is again weaker. More rumors on Rostowski
The zloty is weaker in the morning – around 0.4% to the euro. There is a slight probability that we can rise over 4.26 today. Such a move will require some grim data from Europe or hawkish Fed statement or at least a EUR/USD fall toward 1.3200.
The local currency can be, however, under pressure form more rumors on Finance Minister and Deputy Prime Minister Jacek Rostowski dismissal. Reuters reported on Friday that Tusk plans “to replace Finance Minister Rostowski within months”. The change will probably take place after he “finishes the ongoing budget revision for 2013 and deal with the next year's budget bill”. Moreover the IAR (press agency connected with the Polish State Radio) reports that Janusz Piechociński (Economy Minister, Deputy Prime Minister) said that “Rostowski's fate will be decided in November”. Both news seems to be closely related and the informal confirmation from Piechociński that the case has been discussed increases the odds that actual dismissal is quite possible.
Today the zloty has a higher probability to weaken further then slide toward 4.20. On the other hand I don't expect that we move above 4.26 level on the EUR/PLN.
Expected levels of PLN according to the EUR/USD rate
Expected GBP/PLN levels according to the GBP/PLN rate
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: the EUR/USD failed to move over 1.34 level. Currently we bounced back from the resistance, but the shorts will be preferred when we slide under 1.32 mark.
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.
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.
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.
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.
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