Daily analysis 01.07.2013

The EUR/USD is still without a clear direction – currently around1.30. The PMIs from Europe and the ISM for the States are in focus today. The weekly CFTC report favors euro. Polish PMI – the last eco data before the MPC rate decision.

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

• 9.00 CET: manufacturing PMI from Poland (survey 48.3)
• Between 9.00 CET and 10.00 CET manufacturing PMIs from European economies Spain, Italy). Final data for France, Germany and the EuroZone
• 16.00 CET: manufacturing ISM from the States (survey 50.5)

China's data. PMIs and ISM. CFTC.

During the Asian session we received manufacturing PMIs from China. Both reports, the governmental and Markit/HSBC, were weak, but close to the market consensus. Therefore the reaction on the EUR/USD was rather muted. More excitement should be visible during readings from developed economies, especially regarding the ISM from the U.S. Before that, we have final PMI readings form Germany and France (no major difference between preliminary and final data is expected). However, any stronger/in line reports can confirm a slight rebound in the economy and can keep the EUR/USD above 1.30. A good test for the dollar strength will be afternoon data form the U.S. Last month, the ISM was surprisingly weak (under 50 level and additionally the new orders component slumped and employment was close to contraction). In the June report economists expect the improvement and a return above 50 level. If the survey fails and the ISM does not indicate the pick-up, we can expect a pressure on the dollar, and some rebound on the EUR/USD.

It is worth to note that the net positive non-commercial contracts on the EUR/USD in a weekly CFTC report (more about the CFTC /eng/news/daily-analysis/daily-analysis-07.01.2013 ; in the chart section EUR/USD contracts vs. EUR/USD spot rate) is still positive. Despite the strong slide on the EUR/USD the net amount of long positions almost didn't change. The data form last week already includes a quite hawkish Bernanke conference. It is possible that a bullish eurodollar perception by the speculators on CFTC can push the main currency pair to the north (even around 1.33 if you analyze the recent correlation between the amount of contracts and the spot rate)

Summarizing today's data should give some lift to the EUR/USD. On the other hand if it fails to stay above 1.30 it can strengthen the bears and push the pair lower in the following days..

Polish PMI

The zloty has been pretty calm recently. Despite a slight sentiment improvement there is no appetite for the Polish currency. On the other hand the first/last? wave of sales is behind us. In result we should stay in the 4.30-4.35 range.

While I was writing the analysis the Polish manufacturing PMI hit the wires. The data is much better-then-expected (49.3 vs 48.3) and it is the highest reading in 11 months. The Markit and HSBC point out that we have a first “new orders” growth since January 2012. On the other hand the employment component contracted again, but at the slower pace. In a comment PMI survey, Agata Urbanska, economist for CEE at HSBC claims that “We assume the economy has bottomed in H1 2013 and a gradual though slow recovery will follow” The zloty hasn't reacted to the data. The PMI will not change the Polish MPC perception on the rate decision (25 bps is almost certain in July), but it will confirm the overall view that the July decision will be last in the cycle and the benchmark probably will stay unchanged at least till the end of the year.

Summarizing the data form Poland should limit the hypothetical PLN depreciation. For the stronger , bearish move on the EUR/PLN we have to wait until the global market shift to the “risk on” mood. Worse then estimated ISM from the U.S and strong data from Europe combined with sliding yields on 10-year treasuries should give some more boost to the zloty.

Expected levels of PLN according to the EUR/USD rate

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

Overall technical situation on the analyzed pairs.

Despite a slight rebound on the Polish pairs the technical situation still favors bulls. The EUR/USD is still under pressure.

Technicznie EUR/USD: the pair is still close to the 1.30 level. The buy signal will be generated after rising above 1.32. Any slide under the recent lows favors bears and confirm the target around 1.28

Technicznie EUR/PLN: the situation is still bullish. The target remains 4.40. Only the slide under 4.28 should bring more bears and push the pair toward 4.22.

Technicznie USD/PLN: the rise over 3.22 was a strong buying signal. The target for USD/PLN is around 3.30. If the PLN weakness continues, then the next target will be around 3.35 and in extension 3.5

Technicznie CHF/PLN: we broke 3.50, so the next target is around 3.60. The slide under 4.38 prefers the selling side.

Technicznie GBP/PLN: the 5.10 target was reached. The next target is around 5.20-5.22. The slide under 4.97 should favor bears.