Daily analysis 02.08.2013

The data yesterday favored the dollar – ISM was the highest in two yeas and the jobless claims turned out to be the lowest in five years. Draghi, in line with expectations, sounded pretty dovish. NFP today. The EUR/PLN is heading higher toward 4.26 level.

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

• 14.30 CET: NFP from the US (survey 185k)
• 14.30 CET: unemployment rate in the US (survey: 7.5%)
• 16.00 CET: factory orders in the US (survey: +2.3%)

Dollar bullish data. Non-event conference from Draghi. NFP

Despite that most market participants were noting that Mario Draghi conference would be the key market event it turned out that solid data from the US were shaping the events. The jobless claims reading was the lowest in 5 years (326k vs 345k expected) and the ISM soared to two year high (55.4 vs 52 estimated). The subindex of employment came back into the positive territory and it rose to 54.4 from 48.7. If the strong data stays with us till the September Fed decision, we can be sure that the Federal Reserve will start tapering at the next meeting.

Mario Draghi, in line with expectations, was very cautious on the future Euro Zone economy. He noted that the leading indicators improved in the recent months but he was still concerned with fragile growth (downside risks), high unemployment and further weakness of the credit. Reporters were trying to get more hints regarding the forward guidance, but the ECB chief wasn't eager to elaborate on the issue and he was only repeating that “interest rates to remain at present or lower levels for an extended period of time”. He didn't give also any details regarding the future publication on “minutes” by saying “that at this stage I have to be very, very unspecific”. It seems that the “minutes” will be included in the EBC communication measures, but the timing is still unknown.

Today we are facing the last major data this week – NFP. It is expected that the economy added around 200k jobs in July. It will be positive for the greenback if we exceed that value. The dollar bullish will be also a slide on unemployment rate under 7.5%. As Ben Casselman in today's “WSJ” notes it will be also important to analyze the participation rate [the trend is still on the downside, but in the last two months it picked a bit] and the wages increases. In case of strong readings on all mentioned fields we can expect the fall on the EUR/USD even under 1.3100.

Summarizing the strong data on Thursday increased the odds for the stronger dollar. Despite that we are still trading above 1.3200 the confirmation of solid economic signals form the US can push the most heavily traded currency pair more than 100 pips lower.

Selling pressure on the zloty

The zloty is “sensing” the future Fed's tapering much better than the EUR/USD. It is possible that today's data will increase the odds for September tapering and and we can move above 4.26 on the EUR/PLN with the target at 4.30 next week. The local currency is also under pressure from the bods which 10-year yields increased soared 30 bps in 48hrs (it is mainly due to expectations on further growth and interest rate rises rather than panic capital outflow, but it does not helping the zloty).

Summarizing the hypothesis that EUR/PLN is still more eager to rise than fall should be valid. I don't expect that we can move toward 4.30 today, but next week it can be the target.

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, but the EUR/PLN and USD/PLN are getting closer to generate a buy signals.

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.