Daily analysis 19.07.2013

Dovish Bernanke is keeping the EUR/USD above 1.31 level despite some better then expected data from the US. Fed's Chairman on gold. The IMF positively on Poland. A broad discussion on the wider deficit does not weaken the zloty.

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

• Two-day long G20 summit starts. Discussion on currencies (competitive devaluation and etc.) is not expected

Second day of Bernanke. Some info on gold

The EUR/USD briefly slipped under 1.31 level before the US economic data and 2nd day of Bernanke testimony. The economic reports turned out to be slightly better then expected (weekly jobless claims were lower then estimated and Philadelphia Fed exceeded the median survey). Later the Fed's chief turned out to be pretty benign for the dollar bears and he sounded quite dovish again. The key message for the markets can be closed in one sentence reported in a Bloomberg article. It is “way to early to make any judgment” as to whether tapering will start in September. In the previous analysis I noted that we are moving a bit forward in the calendar regarding the start of QE winding-down. The September date is still the most probable, but the odds that we start tapering at the beginning of Q4 has decreased. During the two-day testimony Bernanke suggested many times that all depends on the data. The whole story is, however, that we don't actually know what kind of data set (combination of different inflation measures and employment performance) will be a trigger that can push the FOMC to start the tapering. The only message is clear – solid data increases the probability of earlier asset purchase reduction confirming at the same time the September date and strengthening the dollar. On the other hand weak economic reports should push the QE winding-down forward and put a selling pressure on the greenback.

Central bankers in their statements sometimes enjoy expressing an unpopular view on some widely discussed subjects. In that context can be seen Bernanke's view on gold. At the end of two-day hearing a Senate members asked Fed's Chairman on his opinion regarding the volatility and a price slump on gold. Firstly he answered pretty standard way that gold is held as a disaster insurance. Later, however, when he elaborated more on the subjects he also said that “movements of gold prices don't predict inflation very well, actually”, and ended his answer saying that “nobody really understands gold prices and I don't pretend to really understand them either”. It quickly reminds me a story when Polish central bank chief told reporters that “stock market is a casino”

Summarizing, the EUR/USD should be pretty stable today (around 1.31). No macro data is expected and investors have to digest the recent outcomes. The next week will be probably again focused on macro data from the states and some statements form FOMC members.

EUR/PLN is close to major support. IMF on Poland

The local currency is still a hostage of global events and the only argument regarding its fall or rise is an asset purchase perspective. It is possible that the situation will remain unchanged for at least several weeks.

In Poland there is still quite an intense discussion on wider then expected budget deficit. The government tries to put most of the blame on the external factors and the MPC members rather the on itself. On the other hand there is a massive attack on the finance minister, Jacek Rostowski who is not able to defend his view. Some reports are even showing that we are getting close to the Greek scenario. A contrary message comes, however, from the IMF. In an interview on TVN CNBC, Dominik Radziwiłł, IMF official, said that “Poland is seen as an extremely positive example” and during discussion about Poland all were “noticing its resistance and strength of the economy”.

Summarizing the recent strength of the zloty was pretty fast and we are getting closer to a key support around 4.20-4.22 on the EUR/PLN. I don't expect that we can slide futher without another major impulse. Next week we should it is possible that we can come back above 4.25 level..

Expected levels of PLN according to the EUR/USD rate

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

The EUR/USD is still bullish. All Polish pairs are in bearish trends.

Technical analysis EUR/USD: the EUR/USD moved quite substantially last. It broke many resistance levels and stopped around 1.32. The upside trend dominates now with target at 1.3200 and support around 1.3070. The next support is around 1.2950. If we fall under that level is should generate a sell signal with a target around 1.28..

Technical analysis EUR/PLN: it fell under 4.28 where a sell signal was generated. The target is 4.22 now. Alternatively a rise over 4.32 gives a buy signal again.

Technical analysis USD/PLN: A fall under 3.28 was a sell signal. The USD/PLN target is 3.18-3.14 now. A comeback above 3.34 again favors bulls.

Technical analysis CHF/PLN:the sell signal was generated after falling under 3.48. The target is 3.42 now. Alternatively the rise over 3.52 should be bullish.

Technical analysis GBP/PLN: the sell signal was generated after sliding under 4.97 with a target around 4.9 and in extension even toward 4.8. Alternatively a rise over 5.04 is an indication of bulls' return.