Daily analysis 08.03.2013

EUR/USD used the opportunity during the Draghi conference and jumped toward 1.3100 level. The rebound on the pound was short lived and today the cable is again around 1.5000. U.S jobs data is in focus today. The zloty is calm and has been trading around 4.1500 since Wednesday afternoon.

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

• 12.00 CET: Industrial Production from Germany (survey: +0.4% m/m seasonally adjusted, and minus 1.2% y/y nsa)
• 14.30 CET: Change in Nonfarm Payrolls (survey 165k and 160k according to Reuters)

Less dovish then expected Draghi. 10-year Spanish yields around 2-year lows..

Mario Draghi was pretty calm yesterday and less dovish then anticipated. The ECB chief, despite reduced GDP estimates (between minus 0.1% and minus 0.9%), and confirmation that the inflation will be significantly below the Central Bank target (especially in 2014 – in range of 0.6% to 2%) claimed that he still expects the gradual expansion in 2nd half of 2013, and “inflation expectations are firmly anchored”. Answering to a reporter question regarding the Italian election he replied that “we live in democracies”, and “much of the fiscal adjustment Italy went through will continue on automatic pilot”. Draghi also added, on comments concerning rate reduction discussions, that “there was discussion” and “The prevailing consensus was to leave the rates unchanged”. During the conference EUR/USD soared around 100 pips and ended the day around 1.3100 level. Currently, however, the move should be considered as a correction in the recent slide. It is worth to note a quite good performance of peripheral debt in last few days. The Spanish 10-year yield is close to 2-year low (around 4.86%). Also the Italian benchmark is coming down from the key 5% level, but it is still around 50bps form the January's lows. The fall of yields is usually negatively correlated with EUR/USD, so the further move on bonds can extend the rally on the common currency.

No additional easing by BoE was used to short the pound.

Even though the BoE didn't decided to expand the asset buying program the rally on the cable was short lived. The pound jumped to around 1.5080 level, but the move was quickly used to open new short positions and in result the GBP/USD is traded at the beginning of European session around 1.5000 mark again. Except the recently mentioned factors which weigh on the sterling it is worth to look closer at the influential article in the Financial Times („Osborne to hand Carney more powers”). The daily newspaper suggests that the British Chancellor of the Exchequer can give more time to the Central Bank “to bring inflation back to the 2 per cent target” and give “the BoE a Federal Reserve-style dual mandate to target both employment and inflation”. Both ideas should put an additional pressure on the pound (at least till 20th of March, when the Osborne's budget will be delivered).

U.S jobs data.

Today investors will focus on widely discussed NFP report. The survey shows that, according to Bloomberg and Reuters, the U.S economy added around 165k jobs in February. It seems the the optimal resolution for the euro bulls is a figure a bit worse then expectations (around 150k will not worsen the sentiment but keeps FED with the QE3). On the other hand much stronger data (above 200k – brings FOMC closer to the end of the asset purchase) or very disappointing report (less then 130 – risk off sentiment) can put pressure on the EUR/USD.

The zloty is stable.

We had a calm day on the Polish currency. The volatility was pretty low comparing to the Wednesday's trading. It seems that the PLN has found an equilibrium (around 4.1500) and should stay close to the current level for a while. We can expect more changes in case of much worse or better data from the U.S. If the job report from the States is significantly stronger then the estimates (around 200k) then the EUR/PLN should appreciate a bit. On the other hand if NFP falls down to expectations then the Polish currency can weaken slightly.

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

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

Technical analysis EUR/USD: the initiated yesterday rebound should be short lived and should not exceed 1.3200 mark. The bearish trend is still valid with the target around 1.2900-1.2840 (head and shoulder target, 50% Fibonacci retarcement level and 200 DMA). The comeback to the bullish trend is possible after moving above 1.3300 (currently low probability).

Technical analysis EUR/PLN: the recent moves do not rule out the continuation of the sliding tendency. It is worth to note, however, that if we stay above 4.1500 the 50 DMA crossing 200 DMA (golden cross) can generate the buy signal and the pair can jump over 4.1900 what in result can generate a buy signal.

Technical analysis USD/PLN: The base scenario is still a move toward 3.24-3.27 (between 200 DMA and 50% Fibonacci retracement level). The comeback to the bearish trend is possible after sliding under 3.1200 (50 DMA).

Technical analysis CHF/PLN: the pair looks pretty stable now. Trading between 3.33-3.41 is neutral for the CHF/PLN and it is also the base case scenario. Breaking up the range trend should generate the buy signal and sliding under 3.3300 should attract bears.

Technical analysis GBP/PLN: the bearish trend on GBP seems to be strong and any rebound not exceeding 4.90 (23.6% Fibonacci retracement level and 50 DMA) should be used to open new shorts. The pivot point is around 5.00. Analyzing 5-year chart we can see that the target of the recent move can be set around 4.5000.