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Daily analysis 26.08.2013

26 Aug 2013 13:15|Marcin Lipka

The EUR/USD is slightly higher after much worse-than-expected housing data from the US. Jackson Hole didn't give any hints regarding the tapering. Winding down the QE positive for the EUR/USD? Fitch cuts Polish rating outlook to stable. Solid retail sales reading.

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

  • 14.30 CET: Durable goods orders from the US (minus 4%; excluding transportation +0.5%)

Closer to 1.34. Jackson Hole. Tapering bullish for the EUR/USD?

The Friday's afternoon was pretty surprising for the EUR/USD investors. After a weaker-than-anticipated data from the US housing market the common currency jumped over 50 pips, briefly exceeding 1.3400 level. Economists estimated that the new home sales would reach almost 500k, but we received a number 100k lower. Additionally the June's data was revised downward by 50k. Regarding the recent theme, disappointing readings from the US can result in later tapering. I doubt that one Eco report can change the FED's mind, but there are at least few question which should be raised. How vulnerable is the housing data to the mortgage rates (they rose 1 percentage point form May's Bernanke Senate hearing)? Is the recent slump in new home sales temporary? Has the treasuries already priced-in the start of QE reduction? The answer to this problems can either push the Members to begin the tapering in September or put it toward the end of the year.

The Jackson Hole meeting, in line with expectations, didn't bring any monetary breakthrough. I would only cite an opinion from the IMF managing director Ms. Christine Lagarde. The Fund's chief said that she “does not suggest a rush to exit” the QE and added that “unconventional policy is still needed”. Lagarde also made some remarks on cooperation between countries, mainly having in mind the tapering and its effect on some developing economy.

Some interesting ideas were presented by Vincent Cignarella from The Wall Street Journal. In an article “Hot Money Clutches Fistful ef Euros As Fed Taper Looms” the author notes that the capital withdrew from emerging markets is being allocated in Europe, whereas previously in similar situations it landed in the US dollar. He also points out that European equities (ETF Vanguard) has been positively correlated with the EUR/USD in the recent week and also started to move in the same direction with the US 10-year Treasuries, whereas previously the correlation was negative. In result Cignarella claims that the dollar rally after Fed starts the tapering can be short-lived and later the “euro should be one of the big beneficiaries”.

Summarizing it is worth to observed the durable goods data (especially excluding transportation). Tomorrow we have also the Ifo reading from Germany. In case of euro positive results we can easily move above 1.3400. On the other hand if the data from the US is solid and the German index fails short of expectations we can slide under 1.3300.

Fitch downgrades the Polish outlook. Retail sales data

Late afternoon on Friday Fitch cut Polish rating outlook form positive to stable. The Agency cites two reasons behind the decision. Firstly the 2013 deficit is going to be 1 percentage point higher than the government estimates in February. “The upward revision to deficit forecasts entails a later peak in gross general government debt (GGGD) than Fitch previously assumed. Fitch now forecasts that GGGD (in ESA terms) will only peak at around 56% of GDP in 2013-14, rather than in 2011, before gradually declining in the medium term. Secondly, the suspension of the first debt threshold at 50% “has reduced the credibility of Poland's rules-based fiscal framework”. At the same time Fitch confirmed the A- rating citing Polish economic resilience (the Agency GDP forecast at 2.4% in 2014 is close to the government estimates), improving external finances (especially the current account deficit), solid banking sector, and strong fiscal financing flexibility (http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=800285&origin=home ).

Today we received much stronger-than-anticipated retail sales data. Economists expected that the sales grew at 3.2% y/y whereas the actual reading was at 4.3% (the highest in a year). It confirms that a recovery is on the way.

Summarizing the scenario for the zloty remains unchanged. I expect the range trading between 4.22 and 4.25 per the euro today. The Polish currency has ignored the Fitch move (honestly should not be that surprising) and the sales data (It seems waiting for a stronger global impulse).

Expected levels of PLN according to the EUR/USD rate

Range EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
Range EUR/PLN 4.2200-4.2600 4.2200-4.2600 4.2200-4.2600
Range USD/PLN 3.1700-3.2100 3.1400-3.1800 3.2100-3.2500
Range CHF/PLN 3.4200-3.4600 3.4200-3.4600 3.4200-3.4600

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

Range GBP/USD 1.5250-1.5350 1.5350-1.5450 1.5150-1.5250
Kurs GBP/PLN 4.8500-4.8900 4.8700-4.9100 4.8300-4.8700

The EUR/USD is still bullish. All Polish pairs are in bearish trends but some of them are getting closer to generate a buy signal.

Technical analysis EUR/USD:We moved above 1.3400 which should be a confirmation of the bullish trend. The target is 1.3700 now. The main support and pivot point is still 1.3200, but if the EUR/USD rises above 1.3500 the support/pivot will be moved to 1.3300.


Technical analysis EUR/PLN: The trend is bearish until we break above 4.26 level. According to AT the current value should be used to open short positions with the target around 4.17 and in extension 4.10. On the other had if we rise above 4.26, the buy signal will be generated with the target around 4.35.


Technical analysis USD/PLN:the trend is still bearish until we rise above 3.22. The current level should be used to open short positions. On the other hand if we move above 3.22 the buy signal should be generated with the target around 3.39.


Technical analysis CHF/PLN:the trading around 3.40-3.,45 should be fairly neutral for the pair. If we slide under 3.40 the sell signal should be generated. Contrary if the pair rises over 3.45 the buy signal is generated with a target around 3.52.


Technical analysis GBP/PLN: we are getting closer to generate the buy signal (after breaking 5.00) with the target around 5.10. Staying under 5.00 still prefers the short positions.


26 Aug 2013 13:15|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

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