Daily analysis 15.04.2013

, author:

Marcin Lipka

Worse-then-expected GDP and industrial production from China are pushing EUR/USD under 1.3100. The pound is stable and has been trading slightly over 1.5300. Polish MPC members on possible rate cuts (prof. Chojna-Duch and prof. Glapiński) before July. Inflation data from Poland at 14.00 CET.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • 14.00 CET: CPI from Poland (survey: 1.1% y/y and 0.3% m/m)
  • 15.00 CET: Empire Manufacturing (survey 7.00)

Slightly lower on EUR/USD after weak Chinese data

We managed to close the week on EUR/USD above 1.3100. On Friday despite some concerns in Europe (the comeback of Cyprus case and another 10 billion help request from Nicosia) the most traded currency pair didn't lose much value, and after weaker then expected data from the U.S (retail sales minus 0.4% vs survey at 0.0%) we closed near the weekly highs (all bad data equals pressure on dollar in anticipation of longer QE3?).

Today we received some crucial macro data from China. Both GDP and industrial production were below the expectations (+7.7% vs estimated +8.0% and +8.9 vs survey 10.1% respectively). Only a retail sales report was in line with predictions (+12.5%). Zhu Haibin, Chinese chief economist at JPMorgan, cited by The Wall Street Journal, claims that “The slowdown in the first quarter is very remarkable”. He also added that despite strong credit rise (1.06 trillion yen in March vs 620 billion in February) “the money is not going to the real economy. That's what we worry about”. On the other hand Lu Ting, economist at Bank of America Merill Lynch says that “it takes time for credit growth to be transmitted to the economy, so it's not the case that if we have strong credit we should have strong growth straight away”.

Markets in Asia reacted negatively on the data from Beijing. Asian equities dropped and currencies sensitive to risk slided (AUD by 100 pips and NZD by 70 pips). The commodity market was also under pressure (WTI down by 1.5% and gold minus 2% - the lowest levels in 2 years). Less significant reaction was on EUR/USD and GBP/USD (under 50 pips down). A calm reaction on European markets seems to be still a result from Japanese capital inflow (after BoJ aggressive monetary policy). However, if the sentiment gets worse we will probably slide further on the EUR/USD.

Stable pound. Some data this week

The British currency is pretty stable recently (around 1.53 USD, 4.80 per PLN). More volatility we can expect after Tuesday's inflation data (both producers and consumers; lower means more pressure on the sterling). It will be also interesting to watch MPC meeting voting results on Wednesday (4 members in favor of QE increasing should push the cable significantly lower).

The base scenario for the pound, however, is still trading around 1.5300 to the dollar and slightly over 4.80 to the zloty.

PLN: Interest rates. Inflation data

We are opening on EUR/PLN around 0.02PLN higher then we were trading at the end of last week (4.12 vs 4.10). Slightly weaker zloty is a result of weak data from China and some statements from MPC members. It is worth to mention especially professor Galpiński (usually neutral or slightly hawkish) who told Bloomberg, that “Poland's central bank should wait until June at the earliest before potentially resuming interest cuts” ( mentioning the date should be regarded as pretty dovish) On the other hand professor Chojna-Duch told Polish Press Agency (PAP) that “Polish Monetary Polish Council may conduct “binding assessment” of Polish economy that could be basis for further rate cuts before July”.

The market will focus on today's inflation data. Its reading below 1.0% should push the zloty lower (but not by more then 0.02PLN). In case of close to estimates reading it should stabilize the zloty.

Looking at the case more broadly it looks that the next cut seems to be possible before the July NBP inflation forecast (I did point it out last Thursday after professor Belka conference). If the incoming data is soft, then we can expect in the following months the benchmark to be at level with “2” at the beginning.

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

EUR/USD 1.2950-1.3050 1.3050-1.3150 1.2850-1.2950
EUR/PLN 4.1100-4.1500 4.1000-4.1400 4.1300-4.1700
USD/PLN 3.1500-3.1900 3.1200-3.1600 3.1900-3.2300
CHF/PLN 3.3700-3.4100 3.3600-3.4000 3.3900-3.4300

Expected GBP/PLN levels according to the GBP/PLN rate:

GBP/USD 1.5250-1.5350 1.5350-1.5450 1.5150-1.5250
GBP/PLN 4.7900-4.8300 4.8100-4.8500 4.7700-4.8100

Overall technical situation on the analyzed pairs:

Slight moves on the majors and relative calm EUR/PLN causing no change on the overall technical situation (daily interval). A small rise on EUR/PLN and 50 pips fall on EUR/USD is in line with a correction valuation.

Technical analysis EUR/USD: we did move above 1.3000 so it changes the overall tendency. The next resistance level is around 1.3150 (50 DMA) and in extension 1.3300 (from the last slide started). The alternative scenario (low probability now) is slide under 1.2850 (200 DMA and 50 % Fibonacci entrancement level) and extension of the bearish move toward 1.2700.


Technical analysis USD/PLN: the slide under 3.22-3.21 (38.2% Fibonacci retracement level and 200 DMA) generated sell signal with the target around 3.1400, which actually was almost met yesterday. It is crucial whether we break 3.1400. If yes, we can expect in the medium term a move even toward 3.04. On the other hand if the support holds, then we should expect the range trade between 3.14-3.22.


Technical analysis CHF/PLN: after sliding under 3.4000 we are in the well known territory (range 3.33-3.40). Another sell signal should be generated under 3.3300 level. If the 3.3300 support holds then the base case scenario is range trade between 3.33 and 3.40.


Technical analysis GBP/PLN: a slight weakness on the pound does not negate the short term bullish trend. The base case scenario (short-term) is still move toward 5.0000 and an attempt to break it and change the medium term outlook. On the other hand a slide under 4.89 should be a trigger to close longs and under 4.85 to open new shorts (a come back to both short and medium term bearish trend).


Technical analysis GBP/PLN: a slight weakness on the pound does not negate the short term bullish trend. The base case scenario (short-term) is still move toward 5.0000 and an attempt to break it and change the medium term outlook. On the other hand a slide under 4.89 should be a trigger to close longs and under 4.85 to open new shorts (a come back to both short and medium term bearish trend).


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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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