Daily analysis 04.02.2013

On Friday we had another day with record breaking levels. Equities beat multi-year highs and EUR/USD climbed to 1.3700. The macro reports increased volatility but majors closed the day on levels before the release. Polish zloty appreciated significantly after U.S. Bureau of Labor Statistics data. Now investors will be preparing to MPC meeting.

Macro data (CET- Central European Time):

• 16.00 CET: factory orders form U.S (survey: +2.2%)

EUR/USD reached another record levels. Positive coincidence on the common currency. Just shy of record highs on U.S equities.

First Fridays of the month are usually seen as one of the most important days during the whole month. This time the situation can be similar. The readings which we got from U.S Bureau of Labor Statistics were really solid even though at first look they didn't look so good. The official unemployment rate rose by 0.1% to 7.9% and NFP increased in line with the estimates by 157k. However, investors were impressed by revisions. The data from December was upgraded to 196k from 155k and November reading was revised to 247K from 161K. It gave in total more then 100k more new jobs last quarter. Interestingly thanks to rising unemployment the EUR/USD didn't fall, because the elevated official rate keeps FED with aggressive, ultra dovish monetary policy. In the long term, of course, more payrolls will decrease the headline unemployment, but in the short run the coincidence helped to preserve the sentiment. Thanks to solid macro data we are only around 150 points (a bit more then 1%) from all time highs on Dow Jones. The S&P500 needs just 50 points (less then 3.5%) to reach beat the 2007 levels. It is hard to imagine that U.S stock market could resist to beat these levels and not to be on every headline around the world. Today investors will only pay attention to factory orders. It is however worth to remember that on Thursday we have the ECB conference where market will try to get any clue whether Mario Draghi and his colleagues discussed interest rate cut or they are concerned about the euro strength. The “yes” answer regarding these question can weigh on EUR/USD.

CFTC – 27K net contracts on the long side.

EUR/USD enjoyed another week with increased net EUR/USD speculative positions on U.S futures market (more details regarding the issue: /eng/news/daily-analysis/daily-analysis-07.01.2013 ). At the beginning of January I emphasized that when the “0” line is crossed either up or down then the move on EUR/USD spot market is at least hew hundred pips. The same situation we could observed last month, and since that time EUR/USD has risen by around 400-500 pips.

PLN stronger. MPC meeting on Wednesday.

The Polish zloty finally took advantage of solid macro data, and equities surge in the U.S. Investors who bet against the PLN decided that during such a bullish sentiment it will be hard to weaken the Polish currency further and breakout the resistance level around 4.20-4.21. Now speculators who trade on the zloty will try to price in the MPC moves. The rate cut by 25 bps on Wednesday seems to be certain.. Any suggestion during the conference regarding a pause in the cycle can help the PLN. On the other hand dovish comments will probably weaken the zloty again.

Expected levels of PLN according to the EUR/USD value:

Technical analysis EUR/USD: the 5 year chart looks still very bullish. Breaking from rising triangle and 200 MA shows that the 1.4000 level is in the range. Now the strong support is around 1.3500 and then 1.3300 which should not be breach.

Technical analysis EUR/PLN: the reverse move toward 4.1500 is a strong bearish signal. The odds for EUR/PLN to come back to range trade between 4.08-4.12 has increased. The longs should be open again when we climb over 4.1800.

Technical analysis USD/PLN: the target around 3.05 has been reached. Another support level is round 3.0000. Looking at the long term chart we can see that the next target (support) can be find around 2.9000 (which was a long consolidation period between February and April 2011 and usually when crossed spurred a strong move either upside or downside). It is also worth to mention the we are breaking down from range trade between 200 week MA and 50 week MA (also bearish signal).

Technical analysis CHF/PLN: bears should be waiting until the CHF/PLN moves under 3.3300. Such a move will initiate the sell signal with the target around recent lows (3.27). The longs are set to open buy positions above 3.41.