Daily analysis 25.01.2013

Another JPY weakness and expectations of better IFO from Germany are supporting the EUR/USD. The next week can also be bullish for the common currency in anticipation of the FED meeting. Worse then expected data from retail sales weakened the zloty. Polish currency can be under pressure at least to the Tuesday's GDP report.

Macro data (CET- Central European Time):

• 10.00 CET: IFO from Germany (survey: 103 points)
• 16.00 CET: New home sales in the States (survey + 385K)

Weak yen and solid data from Germany are keeping the positive sentiment. S&P 500 broke 1500 level intraday.

Only during the yesterday's session JPY weakened to EUR and to USD by around 200 pips. It was mainly the result of recent comments form Japanese deputy economy minister Yasutoshi Nishimura. He claims that 100 yen per dollar is an acceptable level at it won't hurt the economy. Another element which support bulls was PMI data from Germany. Both service and manufacturing data were much higher then expectations (55.3 vs 52 and 48.8 vs 46.8 respectively). The risk on sentiment was not even stopped by 10% slide on Apple stock. Despite a price slump of the largest U.S based company S&P 500 briefly crossed 1500 mark (the highest level in more then 5 years).

Ifo in focus. Crucial next week.

Today investors will be closely watching the economy climate index from Germany – IFO. I confront it on one chart with services and manufacturing PMI. Looking at the last 5 years we can see that PMI quite often leads the IFO reading (both in the 2009 rebound and in 2012 slowing). Taking into the account the correlation and robust ZEW data we can expect that the survey is underestimated. It is possible that we can see much better then expect reading what can be another impulse for the EUR/USD rise. Going forward to the next week it is worth to focus on Wednesday's FED meeting. It will be quite crucial regarding the recent hawkish Minutes. I expect that Ben Bernanke will try to tone down the last statement and will be much more dovish. He can emphasize that FOMC will not withdraw from QE until the unemployment drops below 6.5% and inflation expectations rise above 2.5%. In my opinion the market will be evaluating the meeting from Monday what in consequences can result in weaker dollar.

Weak retail sales data from Poland. GDP and PMI next week.

According to my yesterday's analysis the retail sales was much worse then expected (minus 2.5% vs + 1.4%). Another element which can negatively surprise is Tuesday's GDP report. It is possible that the reading can be even below 2% (survey +2.1). Until the data is published I would rather see PLN to be weaker. However, in the next (if the sentiment remains stable) it is possible that the zloty will gain some ground and come back toward 4.15 before the PMI data.

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

Technical analysis EUR/USD: from the early morning the pair is climbing. The target around 1.3450 is in today's range. Another resistance level is 1.3500. On the other hand if EUR/USD falls below 1.3300 it will be a strong bearish signal which can result in move toward strong support 1.3200.

Technical analysis EUR/PLN: yesterday's approach toward 4.2000 is another bullish signal. If the pair breaks out above 4.20-4.21 resistance it can quickly move toward 4.23 (50% Fibonacci retracement level). On the other hand slide under 4.1500 is a signal to close the long positions.

Technical analysis USD/PLN: we are sill close to breaking 3.1400 and generating the buy signal. For now however, the resistance level defends the upside move (in addition with closing under 50 DMA) and we still have more odds to go lower then higher. If we breakout above the 3.1400 level the move can be stopped at 3.25-3.27. The come back from 3.1400 and falling back under 3.1000 will increase the chances to slide toward 3.0500.

Technical analysis CHF/PLN: we came back to the 3.36-3.41 range trade. The break down under 3.3600 does not mean the sell signal. Only when we slide under 3.3300 the bears will consider to open new short position. On the other hand breaking above 3.4100 will generate buy signal with the target around 3.45-3.47 (between 200 DMA and 50 % Fibonacci retracement level).