Daily analysis 31.01.2013

, автор:

Marcin Lipka

We had quite an interesting day on EUR/USD. The common currency was climbing all day long and peaked at 1.3587 level just after the FOMC statement. No major reaction was observed on currency market after much-lower-then-expected GDP report from U.S. Today investors will be preparing to Friday's NFP and ISM reading. In Poland zloty is gradually weakening after relatively dovish Belka's statement in Senate.

Macro data (CET- Central European Time):

  • 14.30: Jobless claims from U.S (survey 351K)
  • 15.45: Chicago PMI (survey: 50.5)

EUR/USD peaked just after the FOMC statement. Interesting GDP report from U.S.

With the day progressing investors were getting much more convinced that FOMC will be pretty dovish. No matter what data was hitting the markets (weaker GDP from Spain and U.S or better-then-expected ADP report) the eurodollar was climbing constantly and set its high (1.3587) just after 20.15 CET. In the FOMC statement we can read that Ben Bernanke and his colleagues were aware of weak GDP report emphasizing that “growth in economic activity paused in recent month, in large part because of weather-related disruptions and other transitory factors” All but one governors (Esther George) were in favor of keeping QE at the current level (85 billion USD monthly), and ultra low interest rates until the unemployment drops to 6.5% or the inflation expectations (in 1-2 years) will not rise above 2.5%. In seems that the base scenario (QE continuation till Q1 2014 and ultra low interest rates till mid 2015) was confirmed. In future any deviation from the current perception can significantly move EUR/USD or even change the the trend. Quite stunning moment had traders on equities and bonds after the Q4 GDP report. Contrary to the estimates Gross Domestic Product dropped by 0.1%. A good explanation of the situation was presented in The Wall Street Journal article (“Recovery Shows a Soft Spot by Josh Mitchell). The author explains how much negative contribution to the GDP made 22% slump in the defense spending (minus 1.33% of GDP) and slower rise in the inventories (minus 1.27% of GDP). Other elements were quite positive – personal spending, nonresidential fixed investments, and housing activity. The U.S GDP quite nicely summarized Capital Economics calling the report: “the best looking contraction in U.S GDP you'll ever see”.

The zloty is still weak around 4.20. Belka in Senate signaling another rate cut. Tommorow PMI.

The Polish currency does not want to appreciate despite a robust global sentiment and EUR/USD rise. It seems to be still under pressure form a weak economy and further rate cuts. Regarding the latter it seems to be almost certain that MPC will lower the benchmark rate on the next week meeting. It seems to be also confirmed by governor Belka speech in Polish upper house of parliament – Senate. He said yesterday that” One can expect that the easing will be continued”. A bit question mark is still the March decision but the probability of another 25bps cut is getting more probable and is pricing in EUR/PLN rate. It is also worth to mention a statement regarding Polish złoty. Belka said that” We are not trying to defend any zloty rate or range but if there happened any inexplicable volatility, speculators may face the NBP. This has been very efficient so far” Trying to solve that tricky sentence we can imagine that Belka does not want to see the zloty above 4.40 level (last year highs) or much lower then 4.00 (3.9-3.8 we can expect some kind of intervention).

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

EUR/USD 1.3450-1.3550 1.3550-1.3650 1.3350-1.3450
EUR/PLN 4.1400-4.1800 4.1300-4.1700 4.1500-4.1800
USD/PLN 3.0700-3.1100 3.0500-3.0900 3.0900-3.1300
CHF/PLN 3.3700-3.4100 3.3600-3.4000 3.3900-3.4300

Technical analysis EUR/USD: on the 5 year chart we can see the move from rising triangle and breaching 200 week MA (both bullish signals). On the other hand the correction should not exceed 1.3300 level.


Technical analysis EUR/PLN: the situation on EUR/PLN has not changed. The zloty is still weak and there is more chance for the new highs then falling under 4.1500. The target is still 4.2300 and in extension 4.2500. Only the fall below 4.1500 should favor the sell side.


Technical analysis USD/PLN: the pair is testing 3.1000 level (yesterday close was just shy above ). If it falls under 3.1000 we can expect the move toward 3.0500. On the other hand the breakout above 3.1400 can spur the rise toward 3.25-3.27.


Technical analysis CHF/PLN: CHF/PLN chart looks interesting. The significant correction move on EUR/CHF and weak EUR/PLN caused the strong move on CHF/PLN in range of 3.4100 resistance. If we break 3.41 we can go toward 3.45-3.4750 (between 200 DMA and 50% Fibonacci retracement level).



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