Daily analysis 13.11.2012

Decision concerning the Greek bailout tranche postponed until next week. PLN weakens due to risk off sentiment.

According to previous Bloomberg reports the Euro-zone ministers didn't accept the payment of the next bailout tranche for Greece. The members of the summit claim that this case will be solved during the emergency meeting on November 20th. However, it is clear that Athens received 2 more years (2016) to meet the 2% budget deficit target. Commentators also pointed that during the IMF -Euro-group joint conference there were some clashes concerning other issue. Jean-Claude Juncker wants give Greece two more years (up to 2022) to reduce its debt-to-GDP under 120% mark. On the other hand the IMF director Christine Lagarde does want to stick to the previous deadline of 2020.

What is still on the table?

The unusual clash between IMF and Euro-group should not be the headline concerning the Greek issues. The crucial case is how to manage, and reduce the Athens debt. The following resolutions are available. Firstly the creditors can agree to extend the maturity date or/and reduce the interest rate on the current debt. Secondly the Greece can be granted the additional loan to buy back its depreciated debt. Lastly the next haircut is also possible. It seems that policy makers would like to reduce the debt burden, but at the same time not give the impression of forgiving the obligation.

PLN weakens due to risk off sentiment.

The rising risk aversion weights on PLN. I don't see it as a panic selling, but depreciation is getting substantial even though strong debt market should still support the Polish currency. The good „risk off” indicator is that zloty does not pay attention to the local issues. Monday's a bit hawkish statements by MPC member Jan Winiecki were omitted by the PLN. Winiecki „sees one more rate, then time to assess” according to Bloomberg, what is contradictory to Belka's statements that the recent rate decrease is the beginning easing cycle. If investors receive a sustainable solution on the Greek issues the equity markets, EUR/USD and PLN should strongly rebound.

Expected PLN rate according to EUR/USD rate:

Technical analysis EUR/USD: the technical situation has not changed. The downside scenario is more possible with the first target around 1.2600 (50% Fibonacci retracement level), and then range around 1.2475-1.2500.

Technical analysis EUR/PLN: the pair tries to breakout 4.1700-4.1800 level (38.2% Fibonacci retracement level and 200 DMA). The target is still around 4.2300.

Technical analysis USD/PLN: the pair is currently breaking 3.2750-3.2900 (200 DMA and 50% Fibonacci retracement level). The next target is around 3.3400 where the pair can change its medium term trend to bullish.

Technical analysis CHF/PLN: breaking 3.4650 (200 DMA and 38.2% Fibonacci retracement level) should spur move to 3.5000 mark. I still confirm that it can happen as early as this week.