Daily analysis 12.06.2013

EUR/USD is over 1.3300. Bloomberg survey on QE tapering moment. FRA is showing that there will be no more rate cuts. Lower volatility on the zloty.

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

• No scheduled macro data which will significantly impact the analyzed currencies.

EUR/USD is on the rise. QE exit

In line with short-term expectations the EUR/USD is still bullish. Yesterday we managed to close the day above 1.3318 (opening 1.3257). It is pretty possible that the move should continue till the next week FOMC rate decision and Ben Bernanke conference. It will be a good moment for the FED or its chief to elaborate more on the exit strategy and therefore can be bullish for the dollar. At that moment it is worth to look at the Bloomberg survey (published June 7th) regarding when the tapering starts. The news agency asked 59 economists on their predictions when the FED decided to unwind the QE and how fast it will the reducing the asset purchase. Bloomberg reports that two economists expect “the pace of purchases to be reduced at the FOMC meetings on June 18-19 or July 30-31. Sixteen say tapering will begin at Sept. 17-18 meeting, 14 see it happening Oct. 29-30 and 15 forecast the first tapering Dec. 17-18. Two see tapering next year or later”. It is also worth to note that comparing to the survey made in April the median tapering period moved from December to October. Economists also expect that the at the beginning the QE will be reduced by 20 billion. The next week Fed meeting will be pretty important. If Bernanke confirms what he said to the Congress (QE exit in a few meetings), then we can a comeback to the dollar strength. On the other hand more dovish statement can easily move the data forward to December again.

Summarizing till the end of the week we can still expect more greenback weakness. On Monday, however, the trade can be more choppy (more macro data) and with the anticipation of the FOMC meeting.

The zloty enjoys some stability.

Tuesday was another harsh day on EM bonds. Polish papers moved above 4% in line with its counter parts from developing economies. On the currencies, however, it was much calmer and the slide slowed (also on the zloty). It seems that the first (or last) wave of sell-off is over. We can then expect less volatility in the coming days. Another interesting case is that FRA market has stopped pricing any rate cut. In scenario when we see some better macro data (both from Poland and the Eurozone) it is possible that the last cut will end the easing cycle (probably 2.75% will stay at least till the end of the year).

In my opinion the zloty will stay in the 4.24-4.28 range trade till the end of the week. Later more data should support the bullish side and some speculations before the Fed meeting can strengthen the dollar and negatively affect the zloty.

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

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

Overall technical situation on the analyzed pairs

No changes regarding the technical analysis. The EUR/USD is still bullish with target at 1.3300. The zloty pairs are still in bullish trends expect the USD/PLN.

Technical analysis EUR/USD: EUR/USD closed above 1.3200 what is a bullish signal. It sopped close to very strong resistance – 1.33 (it was the level from February – April slide started). Breaking 1.3300 on the upside opens the path toward 1.37. Slide under 1.3200 favors range trade again.

Technical analysis EUR/PLN: the slide on Friday was pretty hard for bulls, but the upside trend is still present until we slide under 4.2200. The target is still 4.40.

Technical analysis USD/PLN: the pair slided under 3.22 which was a bearish signal. The target is 3.15 now and the slide should accelerate after sliding under 3.20.

Technical analysis: as on the EUR/PLN the correction was really hard the bulls. If we slide under 3.40 the rising trend is over. Currently the bulls are still in charge.

Technical analysis GBP/PLN: we almost reached the 5.10 target on Wednesday and on Thursday. If we slide under 4.95 the bears will be in charge.