Daily analysis 18.10.2012

, author:

Marcin Lipka

Chinese GDP in the range of market consensus. Industrial production and retail sales beat the expectations. Today starts two-day long EU summit. The market does not expect any major decisions.

Chinese 3Q GDP growth was in the line of expectations (7.4% y/y). Better than analysts' estimates were retails sales (14.2% y/y; estimate 13.2% y/y) and industrial production (9.2% y/y; estimate 9% y/y). The strongest reaction for the Beginning data we could observed on Asian markets. Nikkei rose 1.7% and Australian market finished the day with 1.1% gain. There were no sings of optimism on the FX market or S&500 futures. Investors closely watch the Chinese markets for the sings of recovery. For now the data does not clearly show if China is „back on track”.

It will be worth to pay attention to announcements concerning the EU leaders meeting. Even though the markets don't expected any critical decisions it is possible that some information can give guidance to the investors. One of them can be the idea presented by the EU President of the European Council Herman Van Rompuy concerning the mutual debt market (starting from the treasury bills). If we see some progress concerning the idea ti is suppose to have a bullish effect on the EUR/USD. I would not expect a significant reaction to Spanish or Greece reports. Both cases are already in prices and there is slim chance that Madrid will ask for bailout during the EU summit.

Coming back to the Wednesday data from the US it is worth to mention about the strongest in 4 years housing data. Both building permits (894K; est 810K) and housings starts (870K; est 770K) beat the markets expectations. Much better data from the U.S economy in the recent weeks and monetary stimulus package (QE3) will suppose to give some positive sings on the job market. It is possible that some of this effect we will observe in the today's jobless claims. The data from last week was surprisingly good. If the coming report confirms the reading around 330k it can be the beginning of the longer trend.

On the European debt market we had very strong reaction on the 10-year Spanish and Italian debt. The rating agency Moody's didn't lower the Spanish creditworthiness and that lack of decision prompt investors to buy Spanish and Italian bonds and lowered its yields by 33 bp (5.46%) and 17 bp (4.76%) respectively. It the trend lasts it is suppose to boost EUR/USD to the higher levels.

The Polish market focused on the weak industrial production data. Analysts expected the drop by around 3.5% y/y, but the reading was much weaker with the drop of 5.2% (y/y). PLN depreciated by 0.02- 0.01 PLN to EUR and USD. The drop of the zloty value was caused not by investors worries concerning Polish economy but rather by increasing odds that RPP lower rates at deeper and faster pace.

Expected levels of PLN according to EUR/USD value:

EUR/USD 1.3050-1.3150 1.3150-1.3250 1.2950-1.3050
EUR/PLN 4.1000-4.0800 4.0800-4.0600 4.1200-4.1000
USD/PLN 3.1500-3.1100 3.1100-3.0700 3.1900-3.1500
CHF/PLN 3.3900-3.3700 3.3700-3.3500 3.4100-3.3900

Technical analysis EUR/USD: EUR/USD still looks bullish. The closest resistance level is the last top around 1.3160. The support level is the trend-line near the 1.3000 level. Crossing 200-day MA by 50-day MA upwards is still suppose to have the positive effect. If the trend lasts it is a chance that next week we can try to attack 1.3300. On the other hand if EUR/USD drops below 1.3000 the first support level is around 23.6% Fibonacci retracement level.

Technical analysis EUR/PLN: today we can expect the breakout form the triangle. If we go up the first resistance level is around 4.11-4.12 (23.6% Fibonacci retracement level and 50-day moving average). If the resistance fails I expect the move towards 4.1700-4.1800 levels where there is 200- day MA and 38.2 Fibonacci retracement. If EUR/PLN goes down from the breakout the first support level is around 4.0300.

Technical analysis USD/PLN: there is higher chance that we see the lows of the year (3.0800) on USD/PLN than on EUR/PLN. The closest resistance level is around 3.1800-3.1900 where converge 50-day MA, 200-day MA and 23.6 Fibonacci retracement level.

Technical analysis CHF/PLN: CHF/PLN is close to the key levels. Between 3.3800 and 3.4000 converge 50-day MA, the down trend-line and 23.6% Fibonacci retracement level. If that resistance level fails I am expecting the move toward 3.4600 where there are both 200-day MA and 38.2 Fibonacci retracement level. If 3.4000 holds there is a chance for move to 3.3200.

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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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