Daily analysis 19.10.2012

Jobless claims negatively surprised. Better ten expected the Philly Fed indicator.

Yesterday's session on the EUR/USD till 20.30 CET was characterized by low volatility (45 pips). However, mistakenly published Q3 earning report by Google worsened the sentiment and caused Eurodollar to lower by 25 pips and close the day at 1.3065. The Asian session was calm and now we are around 1.3070. The main currency pair can be under the influence of news from EU summit. According to the Financial Times European leaders set the schedule for the common Euro-zone banking supervision. Angela Merkel said that „it will still take some time”, „ it is not a matter of months, and she plans it to take effect „over the course of 2013” However, for markets it will be much more important the decision concerning the start of 500 billion European Rescue Fund. At that matter the decision has not been made yet.

The positive data is still coming form the Spanish and Italian debt markets. Thursday was the next down day for 10-year bond yields issued by Madrid (down 12 basis points to 5.34%). For the last 3 months the cost of financing Spanish debt decreased by more then 200 bp. Similarly behaved the strongly correlated Italian bond yields which were at the lowest levels in 15 months. It is worth to mention that EBC has not spent a single EUR to intervene on the debt market. Folks who were claiming that just a treat of EBC action will effect the yields were right.

Yestarday I emphasized that weekly jobless claims can set some tone on the markets. Unfortunate the last week's report was revised upwards and current data was much worse than expected (388K; est: 362K). The 4 week average rose by 1k to 365,5K. On the other hand the Philly Fed index rose more than analysts expected (5.7 points; est 1 point).

On Thursday PLN till 16.00 CET was weakening by around 0.01 PLN despite a relatively positive sentiment. The situation had changed when RPP minutes was published. Only two members of Monetary Policy Council were in favor of lowering the benchmark rate. The minutes reduced a little chances for the change in the interest rate on the November meeting and helped EUR/PLN coming back to the opening levels (4.1000). Today the Polish crosses will be mainly influenced by the global sentiment.

Expected PLN value according to EUR/USD value:

Technical analysis EUR/USD: the technical analysis has not changed much. Still the closest resistance level is 1.3150 – 1.3170. The breakout of this levels opens the way to around 1.3300. On the other hand the closest support is around 1.3300. If it fails the EUR/USD is suppose to go lower to 1.2900 (23.6% Fibonacci retracement level) and 1.2850 (50 DMA).

Technical analysis EUR/PLN; yesterday EUR/PLN again tried to test the down trend line and 50 DMA. Again the probe failed but the chances for the breakout above 4.1200 are increasing. If PLN gets stronger the closest support level is around 4.0700. However, we are closer to the upward move from the short term sideways trend.

Technical analysis USD/PLN: the USD/PLN pair is still far from the key resistant levels around 3.1800-3.1900 (50 DMA, down trend line, 23.6% retracement level). If we break this levels I am expecting the fast move to 3.2600.

Technical analysis CHF/PLN: similarly to EUR/PLN, CHF is close to move above the resistance levels around 3.3900-3.4100 (down trend line, 50 DMA, and 23.6 Fibonacci retracement level). IF we break this levels I expect the move toward 3.4600.