Daily analysis 03.01.2013:
Equity markets are correcting the strong first day of the year rally. EUR/USD is trading around 1.3100 after it failed to make new highs yesterday. PLN is also under pressure after weak debt auction and Kotecki's comments regarding Q4 growth.
Macro data (CET- Central European Time):
- 14.15 – ADP report (USA)
- 14.30 – weekly jobless claims (USA)
- 20.00 – FOMC minutes (USA)
Yesterday's markets decorrelation can result in risky assets sell off.
The first part of the fiscal cliff is over(?). It is what actually equities markets anticipate. The S&P 500 surged 2.5% yesterday. The move was followed by European stocks and peripheries debt. It was the perfect condition for EUR/USD to rise and PLN to strengthen. However, after the morning jump on eurodollar to 1.3300 the rally faded and we ended the day under 1.3200. The similar situation was observed on PLN with stronger morning and weaker evening. The main factor which pushed riskier currencies lower (except AUD) were speculations concerning the possible U.S. Rating downgrade (especially by Moody's which claims that averting the fiscal cliff was just first step and the next are needed (deficit and debt to GDP ratio reduction). The possible downgrade should had negatively influenced the stocks, but it was in such an euphoria that it ignored any bad info. Except the macro issues the bearish move on EUR/USD could have also been started buy large investors who wanted to use the opportunity to close their long positions. The confirmation of this hypothesis was today's 200 pips fall from Wednesday's highs.
Today FOMC minutes, tomorrow NFP.
The common currency can enjoy some relief rally after the FED minutes. On the last Federal Reserve meetings Beranke & Company decided to increase the QE3 with additional 45 billion/month government debt purchases. It is possible also that FOMC members discussed some additional easing regarding the fiscal cliff situation. If that was the case in can give some support to EUR/USD. It is also worth to get prepared for NFP report. The market reaction regarding the job data is not always clear. Sometimes eurodollar uses better then expected report to play “risk on” trade and weaker USD, and sometimes it goes toward more fundamental reaction and USD strengthen. Some direction to tomorrow's reaction can also give the FOMC statement. If FED was discussing additional easing to help weakening economy, the worse data is suppose to weaken USD and better to strengthen U.S dollar.
Some negative info for PLN in the recent hours.
The profit taking on EUR/USD stopped the appreciation trend on PLN. Today the PLN was hit by some negative reports which can weigh on the zloty in the following days. The first bearish news was the Ministry of Finance chief economist comments regarding the Q4 GDP growth” Polish 4Q GDP growth may be below 0.4% Q/Q Kotecki says”. Another negative info for PLN was weak debt auction where not only the yields were higher then anticipated but also the supplementary action was not held. If the global sentiment does not improve, the PLN can test 4.1000 level on EUR and 3.1500 on USD till the end of the week.
Expected levels of PLN according to the EUR/USD value:
Technical analysis EUR/USD: few probes to break 1.3300 level failed. The fall of around 200 pips from the recent highs can spur some significant correction move. The first target of this move are levels around 1.2985-1.3000 (between 23.6% Fibonacci retracement level and 50 DMA). It the support does not hold the next stop is around 1.2800 (38.2% Fibonacci retracement level and 200 DMA). To negate the recent move EUR/USD should move above 1.3240.
Technical analysis EUR/PLN: three week consolidation move between 4.1200 and 4.0600 sets the resistance and support levels for the pair. It is still not clear where EUR/PLN is heading in the coming weeks so the range trade is most probable. However, if it breaks 4.1200 level we can expect the fast move toward 4.17-4.18 (200 DMA and 38.2 Fibonacci retracement level). On the other hand the fall under 4.06 can spur the move toward year's lows around 4.0200.
Technical analysis USD/PLN: today's long bullish candle and yesterday's long lower shadow increase the odds for bullish move to around 3.1600. The the resistance level fails the move toward 3.2300 is possible and then in the medium term even to 3.26-3.28.
Technical analysis CHF/PLN: not much happens on CHF/PLN. The range trade between 3.36-3.40 is the most possible scenario. Only the breakout above 3.41 increase the chances for 3.46 level test.
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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