Daily analysis 01.08.2013

Ambiguous messages from the US – slightly more dovish Fed, better-than-expected GDP and solid ADP report – didn't allow to generate more sustainable move. The ECB and ISM are in focus today. Surprisingly positive data from the Polish PMI.

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

• Between 9.00 CET and 10.00 CET: readings from manufacturing PMIs from Spain and Italy and final data from Germany, France and the Euro Zone
• 13.45 CET: decision regarding the interest rates in the Euro Zone (survey: no change)
• 14.30 CET: ECB chief conference
• 14.30 CET: weekly jobless claims from the US (survey 345k)
• 16.00 CET: Manufacturing ISM from the US (survey 52 points)

Mixed data. Today another set of reports

Starting form the most important news – Fed's statement – we can conclude that it was slightly more dovish than anticipated. The asset purchase buying program didn't change, of course, but the FOMC more closely focused on inflation which is “persistently below its 2 percent target” and claimed that the economic activity “expanded at a modest pace” whereas previously the growth was named “moderate”. It was also noted that “mortgages rates have risen somewhat” and James Bullard didn't vote “against the action” (his remarks on too low inflation were included in the statement). The rest of the statement was left unchanged, so the modifications were dovish. The slight differences don't mean that September tapering is crossed out. The date is still the most probable to start widening-down the asset purchase, but the expectations were slightly moved toward December.

In contrast to the Fed, the economic data were supporting the dollar. The GDP rose more-than-expected (1.7% vs 1.0% - annualized) in the Q2. The growth was revised downward from two previous quarter (which leveled off the Q2 surprise) but the it turned out that the 2008-2009 recession period was not as deep as previously thought and the rebound was stronger. The greenback bulls enjoyed also strong ADP report (200k vs 180k expected) and revised upward data form the previous month by 10k.

Today we are having another set of data. The most important will be Mario Draghi conference. The market speculates that the ECB chief can sound quite dovish despite that the European economy seems to be slowly rebounding. Reporters will try to get more details on previously announced forward guidance (especially what is the time horizon; probably more than 12 months). It will be also interesting whether the ECB is going to publish “minutes”. At 16.00 CET we are also getting the ISM from the US. Better-than-anticipated data (especially on the employment subindex) should help the dollar (worse inversely).

Summarizing we didn't get a clear answer regarding the direction on the EUR/USD. In my opinion, however, the future data should exceed the estimates to push the Fed toward tapering in September. The market expects that Mario Draghi will be rather dovish (euro negative). Only when the ECB chief focuses on the better economy outlook and with lower confidence will talking on the rate cuts then we can see the euro rise.

No clear signal form the base markets. PMI on the “plus slide”

The Polish currency was not really affected by the base markets. The data was not clear enough to generate a stronger move. The EUR/PLN briefly rose above 4.25 (as expected yesterday) but then returned under that level. In the morning we received manufacturing PMI. The index prepared by HSBC and Markit was the strongest in almost 1.5 year. I noted on Tuesday that the data would have to be above 51.0 to move the zloty (actual reading is 51.1). The zloty gained around 0.4% after the PMI was published. Agata Urbanska, HSBC economist for Central & Eastern Europe said that “The PMI index has importantly broken into the growth zone in July driven by strong output and new orders indices. She also added that “The PMI survey is yet another data piece that shows that the Polish economy has bottomed in H1 2013. Going forward the big question is about the pace of recovery. We remain cautious on this from and so seem to be the manufactures in the PMI survey”.

Summarizing the data should support the zloty in the short term. In the following days, however, the market will come back to the moves on global sentiment and the EUR/USD trend. Today we should stay around 4.22-4.25 levels.

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. All Polish pairs are in bearish trends.

Technical analysis EUR/USD:the bullish positions are still preferred. Yesterday we almost touched the target/resistance at 1.3300. The next target is 1.34 (quite strong). Alternatively the slide under 1.3080-50 prefers the shorts.

Technical analysis EUR/PLN: we have reached the first target around 4.22. If the strong support around 4.20-4.22 is broken then the EUR/PLN can slump even toward 4.10-4.13. Alternatively the rise over 4.28 is a buy signal.

Technical analysis USD/PLN: A fall under 3.28 was a sell signal. The USD/PLN target at 3.18-3.14 is almost reached. The next one is around 3.05. A comeback above 3.26 again favors bulls.

Technical analysis CHF/PLN:the first target was reached at 3.42. The strong support is around 3.40. If it falls under 3.40 the next target is around 3.33. Alternatively a rise over 3.48 is a buy singal .

Technical analysis GBP/PLN: the sell signal was generated after sliding under 4.97 with a target around 4.9 (already reached) and in extension even toward 4.8. Alternatively a rise over 5.00 is an indication of bulls' return.