Daily analysis 19.02.2013

No session in the States had resulted in low volatility. The market didn't react to fairly dovish Draghi speech before ECON. The German ZEW will be in focus today. In Poland we had an interesting statement from Tusk economic advisor Dariusz Filar and two MPC members interviews on TVN CNBC. At 14.00 CET we have the crucial data on industrial output.

Najważniejsze dane makro (czas CET – środkowo europejski):

• 11.00 CET: ZEW index from Germany (survey 35 points)
• 14.00 CET: Industrial output from Poland (Bloomberg survey: minus 3% y/y and Ministry of Economy: minus 3.5% y/y)

Draghi and ZEW.

The absence of U.S investors resulted in low volatility session. Some market participants were waiting for Mario Draghi hearing before the Committee of Economic and Monetary Affairs of the European Parliament (ECON), but he also failed to spur any move. However, if one looks closer at the speech it looks pretty dovish (http://www.ecb.int/press/key/date/2013/html/sp130218.en.html ). The ECB President said that “the exchange rate is not a policy target, but it is important for growth and price stability”. He also added that “the downside risks (on inflation) stemming from weaker economic activity and, more recently, the appreciation of the euro exchange rate. Lack of bearish reaction on Draghi's statement (even taking into the account low volume) can spur a short term bullish move. The impulse can be strengthen by strong German leading indicator reading – ZEW. We should rather forget about the scale of surprise we had last time (around 20 points higher then median forecast) but if it exceeds 40 level it should be positive for EUR/USD (with chances to move above 1.3400) and for two other crucial data – PMI and IFO. Contrary if ZEW falls short of expectations (below 35 points) we can observe a strong slide on EUR/USD with successful test of 1.3300 to the downside.

MPC members statements. Tusk economic adviser Dariusz Filar interestingly on rates. Belka's interview for WSJ. Crucial data on industrial output.

Yesterday we had another series of statements from MPC members. After Friday's dovish opinions from professor Zielińska-Głębocka and professor Chojna-Duch another easing calls were presented by Andrzej Bratkowski on TVN CNBC. He said that “ Polish benchmark rate should be at 3%”. In contrast Jan Winiecki clamis that the current 3.75% rate is appropriate for inflation below 2% and he “does not really see cope to cut Polish rates'. An interesting view on the interest benchmark was presented by Tusk economic adviser Dariusz Filar. He told Bloomberg that January CPI isn't a reason for rate cut and added that if the March NBP forecast is within 1.5%-3.5% he sees the rate unchanged till July's Central Bank estimates. The opinion is quite surprising especially the recently both Tusk and Finance Minister Jacek Rostowski has been calling for further rate cuts. From a long Q&A with Marek Belka for The Wall Street Journal (http://blogs.wsj.com/emergingeurope/2013/02/19/qa-with-polish-central-bank-governor-marek-belka/) only the last answer was interesting. The central bank chairman repeated the main info from the last MPC statement but also added that “we are not extremely happy about the increasing share of non-residents in this market (bonds). We have to look at many things and define our strategy for the nearest future, when I say nearest future I mean a few months). It is hard to say whether the central bank is really concerned about the bond market stability or it is just an argument for hawks. At the end I want remind about the production data. If the reading is lower then minus 5% y/y we can expect a strong move on EUR/PLN and finally breach the 4.2000 level. The stronger PLN I would only see when the actual data is above zero (low probability). In that case it is possible that EUR/PLN pair will comeback to the range trade (4.15-4.18).

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

Technical analysis EUR/USD: the last 24 hours didn't change much and we are hoovering near the 1.3320-50 levels which is also a strong support (23.6% Fibonacci retracement level). 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: we are still moving above 4.1800 what is a bullish 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 still 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).