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Daily analysis 19.06.2013

19 Jun 2013 10:45|Marcin Lipka

EUR/USD around 1.3400. Today finally we are getting FOMC statement and Ben Bernanke conference. The “WSJ” article on Bernanke from 2005. Another EM sell-off. Professor Hausner on monetary policy.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • 14.00 CET: Industrial output (survey: minus 1.9% y/y)
  • 20.00 CET: FOMC Rate Decision
  • 20.00 CET: Fed Releases Summary of Economic Projections
  • 20.30 CET: Ben Bernanke conference after the Fed rate decision

The move over 1.3400; FOMC and Bernanke

On Tuesday we had a few attempts to move over 1.3400. The last one, late afternoon European time, was successful. The most traded currency pair got some support form the macro data (slightly better ZEW – positive for the euro; inflation close to the survey and weaker housing – negative for the dollar). The EUR/USD has got quite a good position before the FOMC meeting results. It has risen quite substantially recently, and any correction (whether justified by Fed statement or not) does not have to break the trend.

Most analysts point out few key issues which can will be emphasized either by Ben Bernanke or FOMC. I have recently mentioned about some of them, but it is worth to remind them.

  • Approach to the employment: Strategists led by Rajiv Setia claim that it “would be hawkish if FOMC focuses only on unemployment rate and fails to recognize recent decline in payroll growth”
  • It is worth to pay close attention to the Fed growth and inflation estimates. If they are revised downwards (pretty possible) then it will be a dovish sign
  • I would also agree with Milan Mulraine, director in TD securities, who says, that during the conference Ben Bernanke will underline the fact that even when Fed reduces its QE, its policy will be accommodative for a long time

At the end I want to recommend the Wall Street Journal article on Ben Bernanke (issued eight years ago) “ Long Study of Great Depression Has Shaped Bernanke's Views” (especially valid amid speculations that the Chairman will not run the third term). The paragraph on Bernanke Grandmother and her explanations on Great Depression is really nice.

Summarizing I would see that both Ben Bernanke and Fed will sound more dovish then in the recent “minutes” and during the Congress hearing. The first EUR/USD reaction can be bullish and can push the pair even toward 1.35. However taking into the account the recent gains, the rise can be used to cash some profits which initiate a correction (maybe around 200 pips; which can last a few days). In the medium-term I am still bullish on the EUR/USD unless we slide under 1.3200.

Fear on QE tapering still weights on the zloty.Stable zloty.

The zloty in line with other EM currencies weakened less then 1% yesterday. The move was initiated by the fears of QE tapering. It is possible that even if Bernanke sounds pretty dovish the “fear scenario for EM” will be valid for many more weeks. In the short-time, however, the zloty should gain some value on more dovish Fed approach (but rather not sliding under 4.20 per euro).

On Tuesday I emphasized that we need a statement form professor Haunsner to confirm the rate cut in July. Coincidently the professor spoke to reporters yesterday, but he sounded rather enigmatic saying that “Polish rates at close at appropriate level and Poland may shift to neutral monetary bias in July or may also keep easing bias”. A slight hint regarding interest rates we can get from today's industrial production reading. Any reading near to consensus will rather bring the MPC closer to the cut. The zloty will positively react only to the data above “0” level.

Summarizing the zloty can gain some value after the Fed. However, there is a slim chance that the move will push the zloty under 4.20 mark. The Polish MPC will probably lower the rate in July (around 80% probability) unless the local data is pretty strong (both manufacturing and retail sales) and the Fed is quite hawkish (will increase the future rates and give the argument to leave the benchmark unchanged).

Expected levels of PLN according to the EUR/USD rate

Kurs EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
Kurs EUR/PLN 4.2400-4.2800 4.2400-4.2800 4.2400-4.2800
Kurs USD/PLN 3.1600-3.2000 3.1400-3.1800 3.1900-3.2300
Kurs CHF/PLN 3.4400-3.4800 3.4400-3.4800 3.4400-3.4800

Expected GBP/PLN levels according to the GBP/PLN rate.

Kurs GBP/USD 1.5650-1.5750 1.5750-1.5850 1.5550-1.5650
Kurs GBP/PLN 4.9500-4.9900 4.9700-5.0100 4.9300-4.9700

Overall technical situation on the analyzed pairs.

We are still bullish on the EUR/USD. The USD/PLN continues its sliding trend and EUR/PLN generated the sell signal.

Technicznie 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.


Technicznie EUR/PLN:the fall under 4.22 ends the rising trend and suggesting to close the long positions. The slide under 4.20 should generate the sell signal with the target around 4.12. Alternatively the rise over 4.28 will be bullish


Technicznie USD/PLN: the pair reached quickly its bearish target – 3.15. The slide under 3.15 should generate more selling pressure and a fall toward 3.08-3.1. Alternatively the rise over 3.22 will be a bullish signal.


Technicznie CHF/PLN:the franc is also close to generate the sell signal (a fall under 3.40 ends its bullish trend)


Technicznie GBP/PLN:also on the pound we are close to generate the sell signal (under 4.95). Falling under 4.95 generates the first target at 4.90. Rising over 5.02 should be bullish for the pair.


19 Jun 2013 10:45|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

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