Daily analysis 23.11.2012

EUR/USD on the wave of risk on sentiment is testing 1.2900 level. News of the day is IFO from Germany. The Polish market: more differences inside MPC

Macro data:

• 10.00 CET: IFO institute index (Germany)
• U.S market closes at 13.00 EST (19.00 CET)

No session in US and Japan lowered the volatility. German IFO.

Holidays in Japan and in the States caused much less activity on the most markets. Today, if no major news hit the wires, the main currency pairs will be set for the sleepy mode. The exception will be around 10.00 CET when the German IFO is published. It describes the conditions and expectation of around 7k business around all major sectors. The survey shows 7th month in the row drop of the indicator (from 100 points to 99.6). Better then expected reading (especially above 100) should boost the sentiment and allow the EUR/USD to break above the 1.2900 mark. On the other hand if the data shows contraction it can spur some pessimism on the market and push the common currency even under 1.2850.

Few key economic data in the coming weak. On Friday GDP reading from Poland.

On Monday the markets should be focused on the Greek bailout details. The crucial will be especially deal agreed between the IMF and Eurogroup. Will Greece receive another two years to meet the 120% debt to GDP target, how its liabilities will be reduced (bond buy back, interest rate reduction or ECB profit transfer?). More help will boost the EUR/USD cause it reduces the uncertainty, and improves the market sentiment. Other key data is Consumer Confidence from the States (Tuesday), New home sales from U.S (Wednesday), and Polish GDP on Friday.

Extreme opinions inside the MPC.

The PLN perfectly correlates with the market sentiment. If the risk appetite rises, the zloty strengthens. On the other hand when investors escapes to safe havens (USD), the Polish currency weakens. This situation will probably not change in the following weeks, but the short term disturbances caused buy the local issues can occur. The recent opinions of the MPC members show quite a diversity concerning the monetary policy. The most dovish is Andrzej Bratkowski, who in yesterday’s PAP interview said that the interest rate should be lower “as quickly as possible” by 150 bp (from recent 4.5% to 3%). On the other hand Jan Winiecki claims that the most appropriate action is only one 25bp reduction (to 4.25%). Such significant disproportion can cause some surprises/speculations before the coming MPC meetings. It can also be used for the larger moves, especially when the actual data diverges from estimates.

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

Technical analysis EUR/USD: the market will try to test 1.2906-.12910 (23.6% Fibonacci retracement level and 50 DMA). If it breaks the resistance it can spur another bullish move to around 1.3000 mark.

Technical analysis EUR/PLN: the move toward 4.1000 should be continued. Further downside move is possible to the levels 4.06-4.08 (strong support – 1 year lows).

Technical analysis USD/PLN: the successful test of 3.1850 level will push the pair to around 3.1500. Similarly to the EUR/PLN the closeness of the yearly lows can stop the sliding move (3.1000-3.1200).

Technical analysis CHF/PLN: more space for the lower move has CHF/PLN. The target after breaking 3.41 level (23.6% Fibonacci retracement level and 50 DMA) is level around .3.3500.