Daily analysis 10.10.2012

After calm Monday, Tuesday enjoyed much higher volatility. Markets were worried about Greece, Spain, IMF world growth forecast and the US earnings season.

In contrary to Monday's session yesterday we had much higher volatility (150 pips on EUR/USD) Only at the beginning of the session we were above the last day closing price. Next we could observed only the downward move caused by IMF growth forecast, protests in Greece and worries about the earnings season. Weak performance of the Eurodollar and European equities generated the lower open of the US market which closed near the lows of the day (over 1% lower).The global negative sentiment can be reverted by the following events. Firstly much better Q3 earnings in the U.S. However, even if it happens we will have to wait at least 3 weeks most of the results. The second element is request for bailout by Spain. It is not going to happen quickly cause the Madrid officials claim that Spain does not need any help now. The last signal which can spur some optimism to the markets is an announcement of the Chinese stimulus programs. Next Tuesday on October 18th China post 3Q GDP and it can be a good moment to give some more boost to the Mainland economy.

Polish zloty is resilient to the EUR/USD downside move and risk off sentiment. Both EUR/PLN and CHF/PLN crosses are stable. Only USD/PLN is higher but it is only the issue of the change of EUR/USD pair. However, we cannot forget that PLN i sensitive to the global sentiment. If it worsens much, some investors will book profits on the debt and currency markets and PLN will weaken fast.

The so called „second expose” of the Prime Minister of Poland will affect the currency markets. I am not expecting anything radical from the speech so it is suppose to be neutral for the PLN.

Expected levels of PLN according to EUR/USD value:

Technical analysis EUR/USD: Tuesday’s long bearish candlestick and closing near the lows of the day is a negative signal. The next argument for more downside risk is breaching the 3 months old uptrend line and 23.6 Fibonacci retracement level. The next support will be range of 1.2730 (38.2 Fibonacci retracement level and 50-day MA) and 1.2770 (200-day MA). The argument for the bulls will be closing the day above 1.2900.

Technical analysis EUR/PLN: no major negative signals was generated yesterday on EUR/PLN. We can see that in the coming days we should breakout the triangle (either upside or downside). Also 50-day moving average is getting closer to the EUR/PLN rate. The breaching of 4.10-4.12 level will generate strong buy signal for EUR to PLN.

Technical analysis USD/PLN: USD/PLN is close to the resistance levels around 3.1800-3.2000. If it breaks 23.6% Fibonacci retracement level, the downtrend line and 50-day MA it can cause the strong selling signal of PLN and we can see levels around 3.3000 pretty fast.

Technical analysis CHF/PLN: In recent days CHF/PLN has enjoyed low volatility. Also we observe almost no changes on EUR/CHF what causes that CHF/PLN moves similarly to EUR/PLN. The strong buy signal of CHF/PLN will be generated after it breach 3.4000 level (downtrend line, 50- day MA and 23.6% Fibonacci retracement level. The breakout above 3.4000 will generate at least 0.10 PLN upside move.