EUR/USD during the Asian session jumped to 1.3390. Strong moves on other G10 currencies. Interesting EUR/USD valuations from Credit Suisse. Fairly relaxed situation on the zloty aond other developing currencies.
Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
- 14.00 CET: CPI from Poland (survey: 0.1% m/m and 0.8% y/y)
- 14.30 CET: Retail sales form the U.S (survey +0,4%; excluding autos and gas +0.3%)
- 14.30 CET: weekly jobless claims from the States (survey 346K
EUR/USD is higher again. Large swings on the yen and aud. Credit Suisse on the EUR/USD
EUR/USD during the Asian session was close to 1.3400. The rising trend on the EUR/USD is mainly due to large moves on currencies, stocks and bonds. On one hand the dollar should be supported by the sell-off on EM markets and additionally by Australian dollar slide which was benefiting for a long time form the carry trade trade strategy. On the other hand, however, the slump on USD/JPY (almost 10% fall from the day when Ben Bernanke suggested a QE reduction in a few FOMC meetings) put pressure on the dollar which has its side effect on higher EUR/USD (the Japanese currency is bought heavier toward the dollar then to the euro). In result the EUR being a bit on the side recently, has benefited a few hundred pips.
From the overall medium-term bullish dollar sentiment it is worth to cite a contrary analysis form Credit Suisse. The finance experts from Zurich claim that in 3-month the EUR/USD will rise to 1.37. The arguments supporting this theory are both short and long term. According to Bloomberg Credit Suisse notes that: “Divergence between U.S. European data have narrowed; suggests ECB less likely to ease rates, “ECB's OMT operations reduced tail risk to peripheral funding stress, so portfolio inflows are back, “OMT policy also reduces EM Central Bank's needs for diversification: flows to AUD and CAD now coming back to EUR”, and U.S needs capital inflows of $110 b every qtr while euro area's record surplus means euro-zone exports $15b per qtr: $125b outflows per qtr required to keep EUR/USD unchanged. All the mentioned arguments seems to be pretty accurate, expect the last one. The U.S has had the CA deficit for years and now it is actually shrinking. In the long term it will be even smaller taking into the account future oil and gas production. Moreover the CA is rather long term factor (forecast is 3-months) and regarding the overall turnover on the EUR/USD it is just a fraction. Therefore the 1.37 rate is possible, but in my opinion it will be rather supported by more accommodative (slower QE withdrawal) form the FED then the CA differences.
We are getting closer to the Wednesday Fed meeting and Ben Bernanke conference. It is possible that the trade on EUR/USD will be more polarized and the bulls would like to cash some profits. Therefore I don't EUR/USD will exceed 1.3400 till mid next week.
EUR/PLN around 4.27
Around 14.00 CET the CPI from Poland will be published. In such a strong influence of global sentiment the local data will probably be ignored. It will not give a strong direction regarding the future interest rates especially that the cycle is close to the end (or already is finished). The FRA contracts also do not show any more rate movement. The other, quite positive, signal for the zloty is its reaction toward both U.S and Asian equity sell-off. It means that a stronger correction on stocks is not a problem for the zloty now.
I don't expect any major moves on the PLN till the end of the week. The chances for the rise over 4.30 and fall under 4.24 are pretty slim. Investors will be rather more keen to wait for the next week data (both Eurozone and Polish) and FOMC meeting (with Ben Bernanke conference).
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: the rise above 1.3300 is another bullish signal (will be even stronger if we close the week above that level). In the short-term there is a chance that we will be testing 1.35 and in the medium-term even 1.37.
Technical analysis EUR/PLN: the trade on EUR/PLN is still bullish but with a slower momentum. The 4.40 target is still in place. Alternatively the fall under 4.22 should end the bullish trend.
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.