We are moving around 1.3300 on the EUR/USD. Today the ZEW and retail sales form the US are in focus. Spread between 2-year German bonds and 2-year treasuries can direct the EUR/USD? Current account was positive, but the overall balance of payment was not really outstanding.
Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
- 11.00 CET: ZEW from Germany (survey: 39.9)
- 14.30 CET: Retail sales from the States (survey: +0.3% m/m; excluding autos and gas: +0.4%)
ZEW and retail sales. Spread
On Monday we stabilized most of the day around 1.3300 level. Today we are expecting the ZEW index and retail sales from the States. The market is also waiting for the first in 6 quarters positive reading from the euro area economy tomorrow.
Taking into the account the fairly positive data from Germany (industrial production, leading indicators) the ZEW should easily exceed the expectations around 40 points, especially the at the beginning of the year we had figures around 48. On the other hand we have to remember that much of the gain can be already priced in so only a solid reading can help the EUR/USD. In case of value under 40 I would rather see a disappointment.
Today it is worth to note James Mackintosh article form the FT (“The strange case of the descending dollar”). The author explains that the dollar weakness is derived rather form the stronger pound, euro, or yen then the broad dollar weakness. Another issues which Mackintosh points is spread between 2-year German bonds yields and 2-year US treasuries. The short-term rates are staying low (despite the sharp rise of 10-year treasuries but rate hikes are not expected earlier than in 2015), a and the German counterparts are rising on better-than-aniticpated economic data. Therefore the negative spread is narrowing what is also helping the EUR/USD (please look at the correlation in the video part of the article).
Summarizing we should not move much from the 1.3300 level. The base case scenario is to wait for either stronger bearish or bullish signal.
The strong zloty. Balance of payments
There is still a positive sentiment toward the local currency. It is mainly due to a come back of foreign investors and a perception that Poland is in a “better EM basket”. Additionally we have also an opportunity to gain on the euro area recovery (what emphasized the Credit Suisse report yesterday). There is also a positive sing from another month with C/A surplus. We have to see how long it will last and whether it will not widen too much when the recovery comes. If the “structural” deficit narrows than we can expect some support to the PLN. However, if we look closer to other parts of the balance of payments we can see that in June foreign investors withdrew around 10 billion PLN from Polish bonds and the FDI were negative (due to negative reinvested earnings). Overall the foreign reserves decreased by around 4 billion PLN.
Summarizing I don't expect any major moves on the zloty today. We should remain in a 4.17-4.20 range.
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
The EUR/USD is still bullish. All Polish pairs are in bearish trends.
Technical analysis EUR/USD: the EUR/USD failed to move over 1.34 level. Currently we bounced back from the resistance, but the shorts will be preferred when we slide under 1.32 mark.
Technical analysis EUR/PLN: the EUR/PLN slided under 4.20 level which supported the bearish trend. The next target is around 4.10-4.13. Alternative scenario is a buy signal when it rises over 4.26.
Technical analysis USD/PLN:we slided under 3.15 on the USD/PLN what suggests that the next target is around 3.05. Alternative scenario is a buy signal when the pair rises over 3.22.
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 signal.
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.