Daily analysis 23.09.2013

Still no major changes on the EUR/USD. German election results without direct impact on the analyzed currency pairs. Fairly good PMI data from China and mixed from the euro area. The Polish zloty is stable – around 4.22 per the euro. Professor Hausner on monetary policy.

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

• Between 9.00 CET and 10.00 CET already published PMI data for the euro area
• Federal Reserve members speeches. The most important will be statement from William Dudley at 15.30 CET

German election. Preliminary PMIs. Central bankers' speeches

From the political point of view the German election was pretty interesting. The CDU/CSU was just shy to get the majority in the Bundestag, pro-business FDP received less than 5%, and the anti-euro AFD was close to bring its representatives to the parliament. For markets, however, the voting was not important. Any major coalition scenarios guaranteed the continuity of the current policies toward the euro-area, which has been the major concern in the recent years for investors.

During the Asian session we had a pretty solid manufacturing PMI readings from the Chinese economy. The Purchasing Manager Index, published by Markit and HSBC rose to its 6-month high at 51.2 points. On the other hand the euro-zone PMI rather fell short of expectations. Both French and German manufacturing readings were below market estimates and the French index is still not able to return above the 50 mark. Some signs of relief were seen the services data where Paris and Berlin were at multi-month highs with readings at 50.7 and 54.4 respectively. The composite Eurozone PMI index reached two year high (52.1). Summarizing the data in Europe Chris Williamson, chief Markit economist wrote that “The overall rate of growth signalled by the Eurozone PMI remains modest, however, consistent with gross domestic product rising by a meagre 0.2% in the third quarter".

Recapping, the market has been waiting for a strong impulse to move the EUR/USD from the recent consolidation. In the following hours we have several central bankers' statements including Mario Draghi and William Dudley (dovish, 3rd most important FOMC member).

Stable zloty. The MPC member Hausner on rates

The Polish currency has been traded around 4.22 in the recent hours. The local bonds are also quite stable with yields around 4.30 on 10-year benchmark.

Professor Haunser (2nd most important person in the Committee, close to the center,) told PAP today that “Polish economy expanding at 2.5% next year would justify to continue neutral stance to monetary policy. He also added that “Central bank may change its monetary policy if Poland's GDP is forecast to grow at more than 3%”. It means that the MPC is quite far from rising the rates and the expectations for the increase can move further toward the 2nd half on 2014.

Summarizing, the zloty does not have any reasons to deviate much from 4.22 mark. Tomorrow we are getting the retails sales data, and in the short term it can increase the volatility on the local assets.

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

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

A breakout above 1.3400 was another bullish signal for the EUR/USD and a confirmation for the move toward the next major target at 1.3650. All PLN pairs are in bearish trends.

Technical analysis EUR/USD: the next target for the EUR/USD is 1.3650 and in the extension even 1.4000. Sliding below 1.3400 generates a sell signal with the first target around 1.3200.

Technical analysis EUR/PLN: the 4.1800 target was reached. The next is fall toward 4.10-4.13 range with a possible test of the lower band. A bullish signal is generated after moving above 4.22 level.

Technical analysis USD/PLN: the target is still 3.05 on the pair (which was almost reached). We are down more than 0.15 PLN since the sell signal was generated. Shorts are preferred until we rise above 3.15.

Technical analysis CHF/PLN: the comeback under 3.43 negates the buy signal. Now the base case scenario is a range trade between 3.40-3.45. Sliding under 3.40 generates a sell signal with target at 3.33.

Technical analysis GBP/PLN: the sell signal was generated with the first target at 4.93 and another at 4.85. The comeback to the bullish trend is generated above 5.03.