Daily analysis 18.02.2013

The statement from G20 summit, in line with expectations, was quite benign. The yen has already been taking advantage of the matter. Leading indicators form Germany – ZEW, PMI and IFO will be crucial for EUR/USD performance this week. Much lower then anticipated inflation from Poland put pressure on the zloty. Tomorrow we have the key data from industrial production.

Najważniejsze dane makro (czas CET – środkowo europejski):

• Macro data (CET- Central European Time)

G20 message. Key data from Germany.

As most analysts predicted, the G20 ended with no major resolution to competitive devaluation. Despite the pledge “not to target our exchange rates for competitive purposes” no country was officially criticized for recent actions. It was partly due to U.S stance, which resisted to put any pressure on Japan, due to its long term expansionary monetary policy (quantitative easing). In result Tokio got a green light to its policy, which will probably be exploited for following months if not years. Japan will only resist to point any exchange rate to avoid a direct criticism. In Europe the markets will focus on leading indicators from Germany this week. As early as tomorrow we get the ZEW index – economist sentiment. Last month the reading was at 2.5 years highs, and Tuesday's data is expected to beat the result. If we look at the chart (PMI, ZEW, IFO), the idicator correctly predicted future moves of the economy (except the beginning of 2012). In consequence if we get a good ZEW reading tomorrow we can also expect a positive surprise from PMI and IFO. On the other hand when the data falls short of expectations it can put pressure on EUR/USD and therefore we may successfully test 1.3300 to the downside.

CPI put pressure on the zloty. Tomorrow key data from industrial production.

I did already mention about the low inflation reading in the weekly summary (http://biznes.onet.pl/ruchy-spore-ale-piatek-konczymy-blisko-poziomow-ot,18501,5422094,1,komentarze-detal ), but it is worth to come back to the subject for a while. The Friday CPI at 1.7% y/y (with expectations around 1.9%-2.0%) is a strong argument for the dovish part of the MPC. The data has already been commented by 2 committee members. Professor Anna Zielińska-Głębocka said on TVN CNBC that she is in favor of the rate cut in March, whereas professor Elżbieta Chojna-Duch told Polish Press Agency (PAP) that RPP should decrease the benchmark rate to 3.00%-3.25%. The reading will be weighting on the zloty for the following days especially that Tuesday's report on industrial production will probably not give any argument for hawks. The Ministry of Economy estimate is even lower (minus 3.5% y/y) then the market consensus (around minus 3% y/y). If the data disappoints investors we can finally move over 4.2000 on EUR/PLN.

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

Technical analysis EUR/USD: since the start of the day we are hoovering near the 1.3320-50 levels which is also a strong support (23.6% Fibonacci retracement level). In the downside move the next short term stop can be expected around 1.3290-60 (50 DMA and low levels from mid January). It is also worth to mention the trend line (green) which is close to 1.3300. If EUR/USD falls under .13260 then we can expect the move toward 1.3080 (38.2% Fibonacci retracement level and highs from December 2012 and lows from the beginning of January). The alternative strategy is long position over 1.3500 (low probability in the short run).

Technical analysis EUR/PLN: on Friday we finally managed to finish the day above 4.1800 and generated buy signal. Technical analysis shows that the next stop should be around 4.2000 and then move toward 4.2300 (50% Fibonacci retracement level) and even the trend change. On the other hand move under 4.1500 (low probability now) increase the chances to slide toward 4.08-4.12 range.

Technical analysis USD/PLN: after managing to to close above 50 DMA Thursday (several attempts were unsuccessful recently) we are testing now 3.1400 level.. If broken then we can expect the move toward 3.25-3.27 (200 DMA and 50% Fibonacci retracement level. A failure to move above 3.1400 and come back under 50 DMA will negate the move (less probable).

Technical analysis CHF/PLN: we are close to generate a buy signal on CHF/PLN. The breaking above 3.4100 will give a chance to move toward 3.4800 (50% Fibonacci retracement level). Shorts should consider to open the positions when we slide under 3.3300 (the possibility of such a move is low now).