Daily analysis 05.08.2013

Weaker-than-expected data from the US jobs market (again) decreases the odds for tapering. James Bullard from Fed was slightly dovish in his “wait and see” remarks. The zloty gained some value on the weaker NFP data.

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

• Before 10.00 CET: services PMI form Italy and Spain and final readings from Germany, France and the Eurozone
• 11.00 CET: Retail sales form the Eurozone (survey: minus 1.3 y/y)
• 16.00 CET: Non-manufacturing ISM form the US (survey 53.1)

Disappointing NFP pushed the dollar lower.

Friday's reading form the job's market was weaker than market consensus. The US economy added only 162k workers whereas economist estimated a gain of 185k. Additionally the data from previous months was revised downward by 26k. Moreover the participation rate decreased by 0.1% (heading again toward multi-year low) and the average salary decreased. On the other hand the official unemployment rate decreased form 7.6% to 7.4% but it was partly due to a decrease in the labor force. Honestly the data was not catastrophic, but it was enough to push the dollar lower and increase the odds that the tapering will not begin in September.

In late Friday afternoon we had also a statement form Fed's member James Bullard (voting, dovish, pointing out that inflation is too low). He said that “QE tapering could risk poshing inflation lower” and it is “important to wait to see if better macroeconomic outcomes materialize in the months and quarters ahead”. He sounded a bit dovish (also not really concerned with the balance sheet), but confirmed the overall Fed's approach of still being in “wait-and-see” mode.

Getting back again to the tapering we moved slightly from the September data but nothing is decided yet. In my opinion the data “must show real strength” to push the Federal Reserve to begin scaling back the asset purchase. During the past week most of the readings were rather strong but the NFP fell short of expectations. The key will be the next jobs data when the volatility is going to be really high.

Summarizing the EUR/USD received a strong impulse to go further north and should try to challenge the 1.34 mark. If it doesn't use the opportunity the market will be disappointed and we can quickly fall under 1.3200.

The zloty takes advantage of the weaker dollar

Recently I noted that the Polish currency is “sensing” the tapering much-better-than the EUR/USD. It was also seen before the payrolls on Friday. The zloty was heading toward 4.26 per the euro. However, when the data hit the wires it rose to 4.23 level. Today the slide is continued and we are heading toward the major support around 4.22-4.20.

There is a higher probability that we will try to test the 4.20 level, but I still don't expect that we can break the major support. The base case scenario is still a range trading 4.22-4.25. If the non-manufacturing ISM falls short of expectations we can get closer to 4.20 but still with a slim chance to move lower.

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 1.3 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.