Daily analysis 13.12.2012

FED didn't disappoint investors and fulfilled all the analysts' expectations. EUR/USD is getting closer to the 1.3000 mark. A bit in the background of the Bernanke show Eurozone finance ministers agreed regarding the banking Union (it can spur more bullishness on the EUR/USD and the attack on 1.3200 is possible). PLN still sensitive to the global sentiment but will also pay attention to the inflation data from Poland.

Macro data (CET- Central European Time):

• 9.30 CET: decision concerning interest rate in Switzerland. It will also be closely watch if SNB decide to implement negative deposit rate for institutional investors
• 14.00 CET: Inflation in Poland
• 14.30 CET: retail sales in the U.S
• 14.30 CET: weekly jobless claims in the U.S

Is sailing deep into uncharted waters can be successful...?

Despite many opinions on the market who doubted for the additional easing Ben Bernanke fulfilled all the suggestions from October minutes (I did write about it on November 15th /nowosci/komentarze-walutowe/komentarz-walutowy-z-15.11.2012 ). The Chairman press conference was “poker face” but he didn't run away from journalists questions concerning hypothetical consequences (inflation) from his ultra dovish monetary policy. However, it is clear that the policy has been positive for the U.S so far (lower unemployment, and GDP growth), and moves away the States from the deflation-stagnation spiral observed during the Great Depression in the 30's and Japanese slowdown in the 90's. If the Bernanke policy turns out to be successful he will have a chance to receive the Nobel prize and record his name in the history.

Getting closer to the details of yesterday's FED decision the Federal Reserve decided to spend additional 45 billion USD per month for the bond purchase, and tied its ultra dovish monetary policy to unemployment and inflation expectations. All the mentioned issued were described in previous analysis. The only difference is the inflation expectation index which sets the boundaries for QE. According to FOMC the index leads the real inflation in around 1 to 2 years. From one side it is reasonable to set such a measure (just to catch the growing price increases earlier), but on the other side if the model is not perfect it can not be able to foresee the changes and the FED reaction can be late. Overall the FED statement/conference was dovish and should weight on the dollar in the following months.

Banking Union and Swiss National Bank decision.

A bit in the shadow of the FOMC Eurozone official decided to from a banking union. Undoubtedly it will be one of the historic decision in the EU. It will much more integrate the countries which share common currency and gives the gives the formal tools for ECB (through ESM) to intervene in banks with liqudity and solvency problems (without the participation of sovereign). All the details of the agreement will be set till the end of March, and later ECB will have around a year to work on technical issues. It can be a warning sing form Poland that if it waits to long for joining Eurozone the consequences can be quite troublesome (more strict rules and diminishing position). The info should support the common currency with probability to test recent highs within a few days period.

The impact on markets can also have statement form SNB. It is possible that the Swiss Central Bank will decide to set a negative deposit rates for institutional investors. It can result in a sell-of of CHF against the EUR and therefore speed up appreciation of EUR/USD pair.

PLN rally on risk on sentiment. Inflation data at 14.00 CET.

The Polish currency should still enjoy the rally on global positive move. Only the today's data on inflation can bring PLN to the local issues. If the price growth exceeds estimates (0.2% m/m and 2.9% y/y) it will strengthen the zloty. On the other side if the inflation is lower then survey showed it will weaken PLN (more possible), but the zloty will not depreciate by more then 0.01 PLN. Late afternoon it should come back to the usual risk on/off behavior.

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

Technical analysis EUR/USD: technical analysis still shows high probability to test recent highs around 1.3150-1.3200 (even till the end of the week). The strong support, in case of downside move, is 1.3000 level.

Technical analysis EUR/PLN: the technical situation on EUR/PLN has not changed. Slight correction should be over soon and there is a high chance to test 4.06 and later 4.04 (till the endo of the year). Strong resistance levels are around 4.10 and 4.12. Breaking upside 4.1200 will be a turning point and changes the perspective to bullish.

Technical analysis USD/PLN: second expected by technical analysis target (3.1200) was reached yesterday. The target is still 3.1000 for the recent move. If breached we can even test year's lows around 3.05-3.06

Technical analysis CHF/PLN: the downtrend is still visible on the pair with target around 3.3300. Shorts should close their positions after rebound over 3.4000.