Daily analysis 26.11.2012

In low volume EUR/USD was just shy of 1.3000 on Friday. Independence issues of Catalonia, and next Eurogroup meeting concerning Greece will be the main catalysts for the markets.

Macro data:

• Eurogroup meeting starts around 12.30 CET

Bulls took advantage of the market conditions.

The Friday's upside momentum probably surprised many investors with its strength. Both the U.S stock market (3 hrs shorter then regular session), and EUR/USD jumped at the end of the day. In the States the main news driving the equities was the preliminary sales results of so called “Black Friday”. In Europe next unofficial reports regarding the Greece bailout negotiations also boosted the markets. However, investors should remember that the surge was in low volume (holidays in U.S, and Japan). It will be crucial how the market reacts after the possible Greek agreement. If it is used to close the long positions it can push the common currency significantly lower (even under 1.2800). On the other hand if the markets holds the current level in can spur more bullish activity and push the Eurodollar above 1.3000.

Spain and Greece are key for the markets.

Spanish Catalonia held its local election yesterday. The markets mainly observed the victory scale of the region pro independent parties. From one side the currently governing, and moderate separatist “Convergencia i Unio (CIU) received only 50 seats (whereas 63 showed the opinion polls). From the other side better then expected results received Catalan Republican Left (ERC) which received 21 seats. If the conservative CIU forms alliance with ERC in 135 seats parliament the will have an opportunity to set the path to the independence. Staying in the South of Europe today we will witness the next act of Greek drama. However, it is possible as the French finance minister Pierre Moscovici said in the TV interview “the third time should be the charm” and the deal will be reached which suppose to ease the market tensions for at least few months.

More MPC members statements.

Before 8.30 CET today 3 statements from MPC members hit the wires. Hausner and Rzońca opinions are fairly close to the market view. However, the next time the most dovish approach represents Andrzej Bratkowski. For the PIN radio interview he said that lower the interest rate by 150 bps may not be enough. He does also not see any inflation risk, and on the December meeting he will apply for the deeper than 50 bps cut. Taking in to consideration all the MPC member opinions the most possible is the rate cut 25 bps. The biggest question mark is the committee approach in the first months of 2013. It is also worth to notice that EUR/PLN does not seem to be eager for more downside move even though the market sentiment is positive. The strong support at 4.1000 holds and without the significant impulse the pair will not be able to break it.

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

Technical analysis EUR/USD: technical situation on EUR/USD is bullish. After breaking 50 DMA and 23.6% Fibonacci retracement level at around 1.2910 the market was just shy of 1.3000 mark. Breaking 1.3000 will open the way to the recent highs around 1.3150-80. The correction move should be stopped by support line around 1.2900.

Technical analysis EUR/PLN: the move on PLN was not strong enough to break the 4.1000 and test 4.0800 level. It is possible that we will witness longer side move in the rage of 4.1000-4.1250.

Technical analysis USD/PLN: USD/PLN looks more bearish that EUR/PLN. Breaking another support levels (50 DMA and 23.6% Fibonacci retracement level) shows that the next stop should be around 3.12-3.13. The slight support is upward trend line (currently at 3.1600 level).

Technical analysis CHF/PLN: the pair stopped around support level 3.4150 (50 DMA and 23.6% Fibonacci retracement level). Breaking this levels should spur the move toward 3.35-36 and later to 3.3300.