Daily analysis 02.04.2013

A slight rebound on EUR/USD after weak ISM from the States and neutral Chinese data. More negotiations in Italy. Today we have the PMIs from Continental Europe and from United Kingdom. The Polish zloty has been traded around 4.1800 and is also waiting for the Markit Index.

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

• 09.00 CET: Industrial PMI from Poland (survey 48.7); actual data 48
• 09.48 CET: Industrial PMI from France (survey 43.9)
• 09.53 CET: Industrial PMI from Germany (survey 48.9)
• 09.58 CET: Industrial PMI from the Euro Zone (survey 46.6)
• 10.28 CET: Industrial PMI from the U.K. (survey 48.7)
• 16.00 CET: Factory orders from the States (survey +2.9%)

Italy and PMIs

After the Easter Holidays we are trading several pips higher then on Friday's close. A slight rebound is a result of much worse-then-expected ISM reading in the States (survey 54.2; actual: 51.3). The weak data from the U.S increases the chances to keep QE3 for “a longer time”, and therefore is negative for the dollar. On the other hand the PMI from China met the expectations, so it lessened the pressure to sell the Euro.

There is still no resolution in Italy. The President formed a group of experts, who will work on social-economic issues and suppose to bring the election winners – Bersani, Berlusconi, and Grillo – closer. Sergio Fabbrini director of the school of government at Luiss Guido Carli University in Rome, cited by “The New York Times”, claims that Napolitano tries to gain some time, and “it is a way to broaden consensus for a possible candidate to lead the government”. The NYT also notes that the President's efforts are welcomed by the parliament leaders, and even the Five Star Movement said that “Mr. Napolitano was going in the right direction”.

Choosing a prime minister with a broader support and perceived as a supporter of Mario Monti reforms can give some lift the the common currency.

Investors will be watching the PMIs from European economies. If the final data is worse then the preliminary readings (especially Germany and the EuroZone) then we can expect the test of recent lows. On the other hand in case of better Markit indicies we can see a slight appreciation move till the ECB meeting on Thursday.

U.K's PMI

Similarly to the common currency the pound is should also react on the PMI's and the Thursday Central Bank meeting. Better then expected Marit data can strengthen the sterling both to the dollar and euro (also to the PLN). There is a slim chance that BoE will decide to increase QE (especially that the recent minutes show that in March (unchanged from February) only 3 out of 9 members supported the additional easing). The base case scenario is still trading around 1.5200.

The zloty is stable despite worse-then-expected PMI

The PMI data from Poland falls short of expectations (survey 48.7; actual 48). There has been no major reaction on the reading. However, if PMIs from Europe are also on the downside, then we can see 0.01-0.02 PLN rise on EUR/PLN pair.

Getting back to a last week case on Polish government “Euro referendum” there is a interesting article from Gazeta Wyborcza “Tusk won't lose on the referendum”. The author, Dominika Wielowieyska claims that Civic Platform (ruling party) tries to reduce the “euro burden” before the Polish and European Parliamentary election as 2/3 of Poles oppose the single currecy.

It seem that the strategy can work locally, but in relation with European partners the rapid changes in strategy and be costly in the longer run (both politically and economically).

Expected levels of PLN according to the EUR/USD rate

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

Technical analysis EUR/USD: Despite a slight correction the technical situation hasn't changed. The goal for the EUR/USD around 1.2700 can be achieved even as early as till the end of the current week. Any rebound not exceeding 1.3000 should be used to open short positions.

Technical analysis EUR/PLN: we are trying to initiate a breaking up move from the range trade. If we move over 4.1900 there is a chance to attack 4.2300 and in extension even 4.3000 level. The alternative scenario is opening short positions under 4.1500 (low probability). The base case scenario is still the range trade (4.15-4.19)

Technical analysis USD/PLN: after a month the buy signal was generated (mid February, breaking 3.14 upside) we did finally reach the medium term terget of 3.2700. . Another resistance levels are 3.30 (highs of mid November 2012) and 3.33-3.35 range. The alternative scenario is short positions after closing the day under 3.2200 (38.2% Fibonacci retracement level and 200 DMA)

Technical analysis CHF/PLN: there is still a high probability that we continue the rising trend. The target for the franc is 3.48 (50% Fibonacci retracement level). The comeback to the range trade is possible after falling under 3.39-3.40.

Technical analysis GBP/PLN: bulls are ruling on the GBP/PLN pair and are pushing toward 5.0000 mark. The breakout will generate medium-term buying signal and keep the short term bullish bias.