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Daily analysis 23.08.2013

23 Aug 2013 12:30|Marcin Lipka

The EUR/USD is holding in mid 1.33 level. Nowotny's remarks on ECB interest rates. More issues regarding the EM sell-off. Lack of emotions before the Jackson Hole meeting. The Polish zloty is stable again. Some of the MPC members were against the forward guidance according to the 'minutes'.

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

  • 16.00 CET: New home sales from the US (survey: 487k)

Calm trading and Nowotny. EM reserves. Jackson Hole

After some uncertainty regarding the Fed's minutes and PMI data from Europe, China and the US we came back near the mid 1.33 level. It seems that it should be the base level to generate further moves. Besides macroeconomic data it is worth to cite Ewald Nowotny. The ECB member and the governor of Austrian Central Bank told Bloomberg that he “personally would not see many arguments now for a rate cut”. He also told Mike McKee that he is cautious on the 'minutes' subject and the publication of the internal ECB discussion could be insecure for its independence. Overall the Nowotny's remarks were euro bullish, especially that it is another opinion (after recent Bundesbank report that in case of higher inflation rate hikes are possible) which decreases the odds for further ECB rate cuts.

As Financial Times reports in article “Emerging markets central banks' emergency reserves drop by $81bn” some of the EM economies felt quite a pressure from the capital withdrawal. Despite that titled $81bn is only 2% of all developing countries reserves (ex China), some countries experienced much larger money outflows. “FT cites mainly Turkey and Indonesia where foreign reserves fell around 13% between April and July. The situation in Ukraine should also concern the local central bank where the reserves decreased by 10% and “are the equivalent of just 2.8 months of imports” (one of the measure whether the reserves are sufficient; in Poland it is around 7). On the other hand it is worth to mention that in recent years central banks accumulated large stocks of reserves – In Brazil foreign currencies were at $50bn in 2006 whereas in 2013 is around 350$. Indonesian on the other hand doubled the reserves in the same period but it is far for the top reached in 2011 (drop from 125 to 93). The market will selectively choose countries with the weakest standing mainly on the current deficit, reserves, macroeconomic situation, foreign debt and etc. and during periods with risk aversion assets of these countries will depreciate much faster.

Today the Jackson Hole conference starts. This time, however, most prominent central bankers will be absent (Ben Bernanke, Mario Draghi). We will also not get any remarks form new Fed's chairman candidates (Lawrence Summers is not coming, Janet Yellen does not have the speech). The market claims that it is a good sign that the guest list is not full of all mighty central bankers because they usually gather in moments of severe crisis.

Summarizing we should stay around the current levels till the end of the week. In the following days the market will focus on German Ifo reading and the GDP Q2 revision in the US.

The zloty is still stable. Minutes form the MPC

The zloty has been recently traded in a narrow range on the EUR/PLN pair. The situation should not change in the coming days. Yesterday the central bank published minutes form the recent MPC meeting. Most of the data included in the discussion was already known by the market, but in my opinion it is worth to note one paragraph. As we remember governor Belka announced “kind of” forward guidance in July, but minutes show that the decision was not unanimous “A few Council members pointed out, however, that no declarations as to probable future course of monetary policy should be made. They claimed that at present it was difficult to assess the impact of the government’s planned changes in public expenditure and revenue on economic activity and inflation in Poland. In the opinion of those Council members, another reason against declaring probable future course of monetary policy was the persistent uncertainty about financial markets' response to the signals of limiting monetary expansion in the United States and to the assessment of the economic and institutional reforms in the euro area”. It can mean that some of the Committee members were against the “forward guidance” and in case of, for example, higher inflation they can start noting the need to rise the rates (can bullish for the zloty in the medium-term).

Summarizing we should be moving around 4.22-4.25 on the EUR/PLN pair in the following hours. It is also worth to remember about Monday's retail sales from Poland which can have a short-term impact o on the zloty.

Expected levels of PLN according to the EUR/USD rate

Range EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
Range EUR/PLN 4.2200-4.2600 4.2200-4.2600 4.2200-4.2600
Range USD/PLN 3.1700-3.2100 3.1400-3.1800 3.2100-3.2500
Range CHF/PLN 3.4200-3.4600 3.4200-3.4600 3.4200-3.4600

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

Range GBP/USD 1.5250-1.5350 1.5350-1.5450 1.5150-1.5250
Kurs GBP/PLN 4.8500-4.8900 4.8700-4.9100 4.8300-4.8700

The EUR/USD is still bullish. All Polish pairs are in bearish trends but some of them are getting closer to generate a buy signal.

Technical analysis EUR/USD: we moved above 1.3400 which should be a confirmation of the bullish trend. The target is 1.3700 now. The main support and pivot point is still 1.3200, but if the EUR/USD rises above 1.3500 the support/pivot will be moved to 1.3300..


Technical analysis EUR/PLN: the trend is bearish until we break above 4.26 level. According to AT the current value should be used to open short positions with the target around 4.17 and in extension 4.10. On the other had if we rise above 4.26, the buy signal will be generated with the target around 4.35..


Technical analysis USD/PLN: the trend is still bearish until we rise above 3.22. The current level should be used to open short positions. On the other hand if we move above 3.22 the buy signal should be generated with the target around 3.39.


Technical analysis CHF/PLN: the trading around 3.40-3.,45 should be fairly neutral for the pair. If we slide under 3.40 the sell signal should be generated. Contrary if the pair rises over 3.45 the buy signal is generated with a target around 3.52.


Technical analysis GBP/PLN: we are getting closer to generate the buy signal (after breaking 5.00) with the target around 5.10. Staying under 5.00 still prefers the short positions.


23 Aug 2013 12:30|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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