Daily analysis 23.10.2012

EUR/USD finished the day with a small gain, equities in the U.S erased all the intraday losses.

Yesterday there was a lack of signals after the market digested the local election results in Spain. The EUR/USD was resisted even to a sliding U.S market (the main indices were around 1% lower just 2 hours before the closing bell). The limited volatility on the currency markets is usually before a stronger break out.

Additionally it is worth to look at other crosses with EUR. On EUR/JPY we are at 5-month highs, and both fundamental and technical analysis spur the upside move. Japanese weak economic data (e.g. yesterday's export report) and central bank's expectations of another QE should weaken the JPY. Technically the situation also looks bullish (EUR/JPY is above 50 and 200 DMA, and in a few days the chart should generate the golden cross). Similarly the chart looks on EUR/AUD cross. It is possible that additional gains of EUR/AUD and EUR/JPY will generate the upside move on EUR/USD.

Statistically interesting but boring from the investors' point of view looked the PLN market. Volatility on EUR/PLN during the day was only 0.01PLN. I don't expect that situation will last. The longer the currency trades in the range the higher the chance for a strong move later. The move can come to markets tomorrow when important economic data is set to be published (PMI from Europe, IFO from Germany, FED meeting).

It is also a chance that PLN will react on today's retail sales data. If the reading is higher then the market consensus it is suppose to strengthen the zloty. On the other hand if the data comes weaker (more possible) I will see PLN weaker.

Expected PLN levels concerning the EUR/USD rate:

Technical analysis EUR/USD: the market is still above the trend line and the key support levels. The chance for upside move is still higher then for the downside one. The closest targets are 1.3100 and 1.3170. However, closing under 1.3000 mark will spur the sell signal with the first target around 1.2880-1.2900 (50 DMA and 23.6% retracement level).

Technical analysis EUR/PLN; the limited volatility is suppose to spur a more sharp move. If EUR/PLN breaks the 4.1100-4.1200 level (50-DMA and 23.6% retracement level) I expect the move toward 4.1800 level.

Technical analysis USD/PLN: the USD/PLN is resisted to the upside move. The breakout from 3.1800-3.1900 level is suppose to weaken the PLN further to the levels around 3.2700. However now the base scenario is the 3.0800 target.

Technical analysis CHF/PLN: similarly to EUR/PLN the Swiss Franc more prone to the upside move. If we break 3.4100 level I expect the move toward 3.4700. If PLN gets stronger only the move under 3.3700 will generate the buy signal for the PLN.