Daily analysis 30.08.2013:
Better-than-expected GDP report from the States bring September tapering closer. British “No” to military action in Syria. The coming week can be a key to currency markets. The Polish zloty corrects the recent slide and moving closer to 4.27-4.28 level. GDP reading in line with the expectations.
Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
- No major macroeconomic data that can affect analyzed pairs
GDP from the States. Syria. The next week
Yesterday we received 2nd estimate of the Q2 US GDP. It turned out to be much better-than-expected (annualized 2.5% vs 2.2% in the survey). The revision was mainly due to positive export contribution (it was widely anticipated after trade data published at the beginning of August). However, regardless the reasons the reading was pretty solid, especially that in July many economists estimated that the growth would be lower than 1%. Moreover, it confirms that the tapering will probably start in September. The data pushed the EUR/USD lower, but the slided wasn't that deep (around 40 pips) and support around 1.3200 wasn't touched. The market clearly doesn't want to take too decisive action before all the crucial macroeconomic reports which are due next week.
The UK decided not to take military action against Syria. The US, however, is still on track to start the invasion, but loosing its closest ally can make the operation shorter and less painful for Damascus regime. According to Wednesday's information sent from UN inspectors they would probably finish their report on chemical weapons on Saturday. Therefore the hypothetical strike on Syria should start at the beginning of the next week. If it doesn't happen the tensions on the oil market should ease, which can also give a positive message to equities and be a bullish sing for the EUR/USD.
As early as today it is worth to look at the next week data. If the Syrian situation calms down or a strike is short-lived, the market will be fully focused on macroeconomic reports. Starting from Monday we are receiving final euro area and Asian PMI readings, followed by Tuesday's manufacturing ISM (closely watched employment subindex) and Wednesday's final GDP report from the Eurozone. On Thursday we are having ECB rate decision (interesting how Draghi comments the recent positive economic data in regard to July's forward guidance and some other ECB members who are suggesting no further cuts). Finally on Friday we are having the crucial jobs report which is the most important reading not only in the following week but will be probably most closely analyzed data in the recent months. It is also worth to observe the market reaction after less significant data and evaluate the EUR/USD strength.
I don't expect any major changes on the EUR/USD today. We are facing too many events next week to risk opening larger positions before the weekend. At the end I would like to recommend the Erin McCarthy (“WSJ”) interview with Adam Mayers from Credit Agricole and Vincent Cignarela (“WSJ”). They mainly talked about macroeconomic conditions of the US, emerging currencies and the next week data (http://online.wsj.com/article/SB10001424127887324009304579043313783586356.html). More about it on Monday.
The zloty corrects recent slide. GDP reading
The Polish zloty has corrected almost half of the recent slide and currently we are around 4.27-4,28 per the euro. Less headlines regarding the military action is Syria and correction on most battered Asian currencies gave some relief to the zloty. Yesterday I noted that the move would be rather short-lived and much less severe that in case of other EM.
The Central Statistic Office published today the Q2 GDP data. The reading was in line with the flash estimate and Polish economy expanded at 0.8% y/y. The main contributor to the growth was export, the consumption was fairly unchanged and investments dropped. On one hand the growth which relies only on foreign trade is not a good sign (it is clear what happens when the international demand fades), but on the other hand if other engines start working (both public and private investments + consumption) than the growth can accelerate significantly.
Today the base case scenario is a range trade between 4.26-4.30 with much lower probability to breach the higher band than yesterday.
Expected levels of PLN according to the EUR/USD rate:
Expected GBP/PLN levels according to the GBP/PLN rate:
The EUR/USD is still bullish. Buy signals were generated on Polish pairs.
Technical analysis EUR/USD: he slide under 1.3200 generates a sell signal with a target at 1.3000. Currently the trend is still bullish and the retest of 1.3400 is still possible.
Technical analysis EUR/PLN: the move over 4.26 generated a buy signal with a first target at 4.30 (almost reached). The next target is 4.35. A slide under 4.24 suggests a return to range trade 4.22-4.26. If the EUR/PLN slides under 4.22 it generates a sell signal.
Technical analysis USD/PLN: the rise above 3.22 generates a buy signal with a target at 3.30. The comeback under 3.18 negates the bullish singal.
Technical analysis CHF/PLN: the buy signal was generated on CHF/PLN with a first target at 3.52. On the other hand the slide under 3.43 should favor a range-trade between 3.40-3.45.
Technical analysis GBP/PLN: we are getting closer to generate the buy signal (after breaking 5.00) with the target around 5.10. Staying under 5.00 still prefers the short positions.
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