Daily analysis 25.06.2013

The EUR/USD stabilizes around 1.3100. FOMC reaction on the market situation. Fisher “big money organize itself somewhat like feral hogs. Kocherlakota issues pretty dovish statement. The zloty is traded below recent highs. Retail sales form Poland.

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

• 10.00 CET: retail sales form Poland (survey:+ 0.9% y/y)
• 14.30 CET: Durable goods orders from the States (survey: +3.% ; ex transportation: 0.0%
• 16.00 CET: Consumer confidence from the U.S. (survey: 75.1)
• 16.00 CET: New home sales form the U.S (survey 460k)

Fed members comments. The market in the “waiting mode”

Since some time I have tried to note that the market is “playing a game” with the Fed. Yesterday bond traders pushed 10 year bond yields above 2.6% (the highest level in 2.5-year). The FOMC finally reacted to the yield appreciation but in somewhat strange way. As Financial Times reports Richard Fisher (non-voting FOMC member, hawkish) said that “Markets tend to test things. We haven't forgotten what happened to the Bank of England. I don't think anyone break the Fed... But I do believe that big money does organize itself somewhat like feral hogs. If they detect a weakness or a bad scent, they'll go after it”. On the other hand, according to Bloomberg, Narayana Kocherlakota (non-voting, previously more hawkish, now heading to the neutral bias) in a non-scheduled statement claims that QE should last until unemployment falls below 7%. He adds that “rates should stay low until 5.5% jobless rate” (recently Bernake repeated 6.5% threshold) and to low inflation is a concern (even suggesting that “FOMC should consider allowing inflation above 2%). Kocherlakota ends that “FOMC still learning how to best communicate”. His statement was really dovish (both on the QE and future interest rate policy). If such a message had been sent form Bernanke last week, we wouldn't have a EUR/USD sell-off but a sharp rise.

It was interesting that two statements were really opposite. Fisher clearly warned the market “not to mess with the Fed”. Kocherlakota put much more blame on the Fed and clearly expressed his view on the monetary policy. Did they do it on purpose or it is a beginning of stronger disagreements inside the Federal Reserve? We should wait for more opinions to get the answer.

It is worth to observe today's macro data. Any readings below the estimates (but not catastrophic) should give some boost the the markets (should increase the odds for longer QE). On the other hand if market (EUR/USD) falls under the recent lows, the sentiment will deteriorate further and more uncertainty will be built.

The zloty takes advantage form the improved sentiment

We can observe some sentiment improvement in the morning (global influence). The EUR/PLN dropped around 1% form the Monday's highs. It is to early to judge whether it is the end of the zloty depreciation (probably not), but any signal will come, either to continue the deprecation or the reversal will come from the global market.

Today's retail sales readings will not affect the markets. The data also will not change the Polish MPC stance regarding the July interest rate decision.

Summarizing we have to wait for the global market improvement (stocks, bonds, EUR/USD rise) to push the EUR/PLN under 4.28. On the other hand if EUR/USD falls under the recent lows then the zloty depreciation will continue and the recent EUR/PLN highs will be tested.

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

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

Overall technical situation on the analyzed pairs:

EUR/USD slide under 1.32 gives an opportunity to slide toward 1.30. All zloty pairs are in bullish trends.

Technical analysis EUR/USD: The slide under 1.32 will give signal to close the longs or open shorts. The next support is expected around 1.30. Alternatively the strong resistance is set around 1.34.

Technical analysis EUR/PLN: the rise over 4.28 is a bullish signal. Breaking 4.32 should be then the next target is set around 4.40. Only the slide under 4.20 ends the recent rising trend.

Technical analysis USD/PLN: the rise over 3.22 is a strong buying signal. The target for USD/PLN is around 3.30. If the PLN weakness continues, then the next target will be around 3.35 and in extension 3.5.

Technical analysis CHF/PLN: the target for the pair is currently 3.5 and in extension 3.6. Only a fall under 3.40 ends the rising trend.

Technical analysis GBP/PLN: the 5.10 target was reached. The next target is around 5.20-5.22. The slide under should favor bears.