Daily analysis 28.06.2013

The EUR/USD is holding above the support around 1.30. Another set of comments from the Federal Reserve. The Polish zloty stabilizes around 4.32. Voting results after May's MPC rate decision.

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

• 15.45 CET: Chicago PMI (survey: 55)
• 15.55 CET: University of Michigan Confidence (survey 83)

The Fed fights back

Yesterday the Fed officials tried to clarify the last FOMC statement. The Federal Reserve members are getting a bit concerned about the current market situation (especially regarding the rising 10-year treasuries, because it inflates the mortgage costs). Their comments are much more dovish currently, then the latest Ben Bernanke conference (just a week ago). On Thursday their opinion regarding the monetary policy was expressed by Bill Dudley (voting, dovish), Jerome Powell (voting, neutral) and Dennis Lockhart (non-voting, dovish). Trying to make it simple they all presented the same view. The macro data is key to the future asset purchase. The time frames are flexible and should be not considered as triggers. They also claimed that markets are out sync (Dudley: “with both FOMC statements and the expectations of most FOMC participants”). Dudley also said (seems to be the most important) that “QE may be prolonged if economy misses Fed forecasts”. It was really clear message. Firstly the Fed has recently missed almost all forecasts (overestimating it) and just a day earlier the 1Q final GDP reading was published at it missed expectations by 0.6 percentage point. Despite dovish comments the currency market was not eager to depreciate the dollar significantly. The answer to such situation can have deputy U.S chief economist at UBS and a former analyst at the New York Fed, Drew Matus. As Bloomberg reports he said in an email that “The range of both speakers and outlets suggests that these comments are, if not coordinated, then at least part of a collective – likely futile – effort to re-mold the market's view of the June FOMC press conference. Matus seems to be right regarding the fist part of the statement. However whether the effort is futile, we have to wait till more members express their opinion and finally maybe Ben Bernanke will be able to express his view (more dovish). The Fed's chief probably will do it in more indirect way (not so obvious as his colleagues from the FOMC), but the message should be quite clear. His goal is probably to push the 10-year benchmark again toward 2%.

Summarizing the September tapering is again in question (but sill the base date). The market tries to push the Federal Reserve to more dovish stance, and simultaneously not to get tricked by some statements which can be revised quickly (and be surprised by September tapering). The “game” is getting more exiting and the question is whether Bernanke will also be pushed to clarify the policy.

The EUR/USD despite some setbacks, is climbing slightly and will probably try to rise over 1.31 mark. However, if it fails then we should expect the successful test of recent lows and a slide toward 1.28.

Polish MPC voting resulst.

The zloty has been pretty calm recently. Despite a slight sentiment improvement there is no appetite for the Polish currency. On the other hand the first/last? wave of sales is behind us. In result we should stay in the 4.30-4.35 range.

During the May voting Marek Belka vote was again the decisive one. It is possible that the same situation will be in July. However, we cannot forget, that also professor Hausner is key to the next month cut. He seems to be a bit more hawkish then Belka, so his “yes” vote should mean that NBP governor backs the cut.

There is still no turning point regarding the EM currencies, so the EUR/PLN is not able to fall significantly. Polish investors should also closely watch the U.S 10-year treasuries. If they start to fall then we should expect more strength of the zloty (but the levels under 4.20 are out of range for now)

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 slided under 1.3070 (50 and 200 DMA) is an indication confirming the sliding trend. The zloty is still under pressure (bullish trend on the pairs). Only the CHF/PLN pair has the opportunity to generate the sell signal.

Technicznie EUR/USD:we get to the first target around 1.30. The next one is around 1.2850-1.2800. Alternatively the longs should open above 1.32.

Technicznie EUR/PLN:the situation is still bullish. The target remains 4.40. Only the slide under 4.28 should bring more bears and push the pair toward 4.22.

Technicznie USD/PLN:the rise over 3.22 was 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.

Technicznie CHF/PLN:we broke 3.50, so the next target is around 3.60. The slide under 4.38 prefers the selling side.

Technicznie GBP/PLN:Technical analysis GBP/PLN: the 5.10 target was reached. The next target is around 5.20-5.22. The slide under 4.97 should favor bears.