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Daily analysis 10.07.2013

10 Jul 2013 11:20|Marcin Lipka

Culmination of negative info for the euro: Reuters interview with Asmussen, IMF world growth reduction, and the S &P Italian rating cut. Moreover, during the Asian session China published much worse-then-expected trade data. Today we have minutes and Bernanke speech on Economic Policy in Boston. The zloty has been slightly above 4.30 with no clear direction.

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

  • 20.00 CET: Fed releases minutes after the last FOMC meeting
  • 22.10 CET: Ben Bernanke speech on history of 100 years of US monetary policy

A series of negative info for the euro. Today “minutes” and Bernanke

European afternoon was quite difficult for the euro yesterday. The common currency received three bearish messages in a short period of time. The most damaging was Reuters interview with Jorg Asmsssen, member of ECB's executive board. It is also worth to note that the conversation was published before Asmussen's scheduled speech on Banking Union. The Reuters video was quickly summarized in a sentence that “ECB rate guidance goes beyond 12 months”. However when we watch the interview ( http://www.reuters.com/video/2013/07/09/ecbs-asmussen-on-rates-banks?videoId=243861289 from 04.30 min), Asmussen cites Mario Draghi claiming that ECB chief said in his press conference “it is not six months, it's not 12, it goes beyond”. The truth is that Draghi didn't say such a thing. He received a similar question but the Central Bank chief didn't answer it. That fact was also pointed out by the ECB which clarified the Assmusen statement writing that “Asmussen didn't intend to give guidance for exact period”. There is also still a question whether Asmussen just made a mistake or unintentionally reviled the ECB strategy. In my opinion the latter is more possible especially that overall central bank statement was pretty dovish last Thursday. The euro slumped on the news deep under 1.2800 level. Other negative elements (IMF growth reduction and Italian rating downgrade from BBB+ to BBB) only kept the EUR/USD near the recent lows. During the Asian session we received also weak trade data from China. Both export and import decreased, while the expectations called for a rise. In comments on the data The Wall Street Journal cites HSBC economist Ma Xiaoping, who says that “This is clearly a reflection of weak demand” The “WSJ” also adds that “Tighter rules introduced in May to bring hot money into the country likely also deflated the growth rate”.

Today investors will focus on the Fed's minutes and Ben Bernanke speech. It is possible that the Federal Reserve was at least as eager to end the QE as in the May 22 minutes. The only exception and a dollar bears hope was that James Bullard expressed concerns on low inflation and therefore give some hope for longer QE. Two hours later Ben Bernanke is scheduled to speak on the history of monetary policy. Joseph Lavorgna is probably right writing that he “doesn't expect Bernanke to “front-run” next week's semi-annual testimony to Congress” which is scheduled on July 17-18.

We had quite a culmination of negative events yesterday (already priced in), and therefore the bearish pressure in limited today. If “minutes” are relatively neutral or more dovish then expected we can see a rebound on the EUR/USD. A deeper slide (under the recent lows) is only expected when the tapering calls are really strong and point the QE reduction for July meeting (less possible).

No direction on the zloty.

The zloty clearly needs a strong impulse from the global market. The recent developments were not able to generate a move which will either push the EUR/PLN under 4.28 or boost it above 4.35. The PLN is slightly supported by falling government bond yields (currently 10-year under 4%), but on the other hand the EUR/USD slide keeps the Polish currency under pressure. There is still an uncertainty regarding the EM economies and some peripheral Euro Zone countries. The zloty's bears also note that QE tapering will weigh on the PLN, but others claim that it can be leveled off by more dovish ECB.

Summarizing the Polish currency will be waiting for a stronger signals which allow the EUR/PLN to fall under 4.28 or rise above 4.35. The latter scenario seems to be more probable.

Expected levels of PLN according to the EUR/USD rate

Kurs EUR/USD 1.2850-1.2950 1.2950-1.3050 1.2750-1.2850
Kurs EUR/PLN 4.2800-4.3200 4.2700-4.3100 4.2900-4.3300
Kurs USD/PLN 3.3200-3.3600 3.2900-3.3300 3.3500-3.3900
Kurs CHF/PLN 3.4600-3.5000 3.4500-3.4900 3.4700-3.5100

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

Kurs GBP/USD 1.4950-1.5050 1.5050-1.5150 1.4850-1.4950
Kurs GBP/PLN 4.9700-5.0100 4.9900-5.0300 4.9500-4.9900

Overall technical situation on the analyzed pairs

The EUR/USD is still on the downside pressure and should retest 1.2800. The target is still 1.2650. Polish pairs are in the bullish trends except the CHF/PLN.

Technicznie EUR/USD: the EUR/USD is in the down trend and should test 1.2800 again. If the support fails then we can expect the further downward pressure toward 1.2650 (lows form November 2012). Alternative scenario is a rise over 1.3070 with a buy signal. Many technical analysts note that on the chart we can see a medium-term hean-and-shoulder formation. The neck line is around 1.28 level and if breached can indicate the target for the EUR/USD around 1.20.


Technicznie EUR/PLN: the EUR/PLN returned to the bullish trend. The first target is 4.35 and the second 4.40.


Technicznie USD/PLN: we almost reached 3.40 yesterday. The target is still 3.50. Alternatively a fall under 3.28 should generate a sell signal.


Technicznie CHF/PLN: the sell signal was generated after falling under 3.48. The taraget is now 3.42. Alternatively the rise over 3.52 should be bullish.


Technicznie GBP/PLN: we were close to generate the sell signal (falling under 4.97). The pair, however, rebounded from 50 and 200 DMAs. Therefore it should retest the 5.10 highs. Alternatively a fall under 4.97 should generate a sell signal.


10 Jul 2013 11:20|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

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