Daily analysis 17.04.2013

, author:

Marcin Lipka

Despite worse-then-expected ZEW reading from Germany the EUR/USD moved over 1.3150. The surge was also not stopped by the downgraded IMF global growth outlook. The pound is waiting for the BoE minutes. There are some reports that 2012 budget deficit in Poland exceeded 3.5% estimated by the government.

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

  • 10.30 CET: BoE minutes
  • 20.00 CET: Beige Book from the States

In spite of all to the north

In recent days the EUR/USD was really resistant to the downside pressure. Even on Monday when the pressure was really hard for the common currency (record gold slide, bearish equities and commodities) it managed to stay above 1.3000. The similar situation we had on Tuesday. Despite worse-then-expected ZEW reading (survey 42; actual: 36.3) and slower growth estimates by IMF (Euro-Zone is suppose to stay in recession in 2013 – minus 0.3%) the euro didn't want to go south. Other important data were close to estimates (besides new home starts which jumped to over 1 million ; survey 930k). However it is hard to judge whether it was positive for the EUR/USD?

Looking deeper for an excuse to trade higher we can analyze Mario Draghi's and William Dudley statements yesterday. The ECB chief didn't say anything new and was focusing on SSM rather then on monetary policy. The latter (well known dove) said that “I see the current pace of asset purchases as appropriate”. He also added that “ I remain confident that the benefits of a stronger and earlier economic recover will trump the costs associated with our unconventional monetary policy measures”. It would be strange if markets expected more hawkish speech form Dudley.

The last chance for surprised bears (that there is a valid excuse for the rise) were rumors that Japan will not be criticized by G20 on its monetary policy. That would be the case if Tokio could withdraw form its fiscal/monetary policy (now its too late actually).Lastly if we look at the chart the breakout was around 1800 CET where there was no data announced.

Summarizing the market clearly is getting ready for more dollar depreciation (EUR/USD rise) on the wave of speculations for longer QE operation (still the result of weak NFP numbers). On the other hand despite tough economic situation in the Euro-Zone the ECB is not eager to lower the rates (claims that it will not increase the credit in the real eco) what makes its monetary policy tighter (relatively to other countries, especially that many of them acting aggressively – Japan, U.S).

Today it is worth to watch the Beige Book announcement. The report on economic conditions in the U.S will probably show some slowdown (probably caused by the sequester). It can be quickly interpreted as more room for longer QE (bearish for the dollar).

The base scenario is still in place

On the dollar weakness we did see some rise on the GBP/USD. The pair, however hasn't moved over 1.5400. Today we receive the info on how many MPC members voted form more asset purchase (expected 3 out 9). If the number is larger (4) then we can expect the significant weakness on the sterling. The base scenario is still levels around 1.5300.

The zloty is still stable. Larger budget deficit in 2012?

The PLN is still fairly unchanged. More downside pressure we can see on USD/PLN, but it is only due to EUR/USD rise. A kind of interesting message was published today by the local daily paper “Dziennik Gazeta Prawna” on exceeding 3.5% deficit target by the government in 2012 (,rzad_sie_pomylil_deficyt_byl_wyzszy.html – Polish only version). The final data will be presented on Monday. The change (according to the DGP will not be huge (probably less then 0.5%)) and I think it should not put a significant pressure on the zloty. It can, however, undermine some trust to the “government market communication”. There is already April 2013 and the Ministry of Finance hasn't suggested that the gap will exceed the plan.

The zloty also should be pretty resilient to the new IMF outlook. The growth estimate was reduced for Poland form 1.75% to 1.3% for 2013. The market has already been pricing in 1.5% expansion (ignoring especially dated estimation from the government – 2.2%).

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:

The move over 1.3150 on the EUR/USD is a positive signal for the bulls. Now the next major resistance is around 1.3300. Polish pairs are still in trends which started more then a week ago.

Technical analysis EUR/USD: the rise over 1.3150 is a positive sing for the bulls. Another resistance level is around 1.3300 (the moment from which we started the last slide). If it is broken then we pen a path to the 1.3700. However, taking in the account the strength of this resistance (1.3300) it does not have to be successful. The alternative scenario is a downside more under 1.3000 (with opening shorts or closing longs).


Technical analysis EUR/PLN: we got another sell signal – slide under 4.1200). The next stop should be around 4.06 and in extension 4.03. The alternative scenario is range trade (4.15-4.20) but only after move over 4.1600.


Technical analysis USD/PLN: we are trading lower again (3.12). The base scenario is still bearish with the target around 3.05. Alternatively the move over 3.2000 should be a signal to close shorts/open longs.


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: the target for the pair is moving toward the recent lows around 4.7000. The alternative scenario is move over 4.90 and then opening new longs/ closing shorts.


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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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