Daily analysis 28.11.2012

EUR/USD didn't have enough power to break above 1.3000 mark. Hawkish statements by Dallas Fed President Richard Fischer and coming worries concerning Fiscal Cliff weigh on the common currency. On the risk on sentiment the PLN is also losing value slightly.

Macro data:

• 16.00 CET: New home sales (USA)
• 20.00 CET: Beige Book (USA)

Solid Eco data subdued by cautious statements and OECD report.

Yesterday the market tired to find its direction after the decisions concerning the Greek agreement. For a longer time it stayed sidelines, but later it seemed to pick only the negative signals. Before 10.00 CET Dallas FED President statement hit the wires. Richard Fischer claimed at the conference in Berlin that FOMC must limit its asset purchase because it can cause the “horrific consequences” (inflation). On the other side FED member Charles Evans (in Toronto during the Asian session) suggested that U.S central bank should replace expiring Operation Twist with additional bond buying program and held the total QE value at 85 billions per month until the unemployment drops to 6.5%. This second dovish idea was ignored by the broad market. Coming back to the European session around midday the OECD published its 2013 world economy outlook. The organization predicts that next year will be difficult for the world with recession in the Eurozone. However, it is nothing new, because similar reports have been recently published by IMF and European Commission. The sentiment didn't improve even after better then expected macro data form the States (durable goods orders and Conference Board index were much higher then the expectations). On the other hand the markets nervously reacted to statements by Senate leader Harry Reid. He told reporters that: “little progress had been made on the fiscal cliff talks” . The democratic spokesman opinion weighted on the U.S markets and EUR/USD till the end of the day.

PLN weakens on the risk off sentiment. Moody's positive report on Polish debt does not help.

Before the U.S session the EUR/PLN tested levels around 4.0900. Later with the broader selling pressure from risk assets the euro zloty pair came back above 4.1000. At the end of the day cited by PAP Moody's report regarding Polish fiscal and debt situation was published. The agency analysts claim that cautious debt management and responsible fiscal policy will improve the Polish debt profile. In my opinion it is possible that one of the major rating agencies will raise at least the rating outlook to positive (maybe as early as in the beginning of the year). It will support the strong bullish market on the Polish government bonds and can strengthen the PLN even by 1%. However in the following days investors will closely watch the global sentiment, and Friday's Polish GDP data.

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

Technical analysis EUR/USD: EUR/USD stopped at strong support level around 23.6% Fibonacci retracement level, and 50 DMA). Breaking downside the 1.2900 mark will generate the sell signal with the target between 1.2740-1.2800. According to the technical analysis the levels above 1.2900 should be used for the long positions with the target around 1.3150.

Technical analysis EUR/PLN: the comeback from 4.09 to 4.10 does change nothing regarding technical analysis. The downside scenario is more possible with targets around 4.08 and then 4.06. Only the breakout above 4.1250 (50 DMA and 23.6% Fibonacci retracement level) will generate the buy signal.

Technical analysis USD/PLN: staying above the slightly upward tending line does not negate the selling pressure. Only the breakout above 3.1950 will generate the buy signal. All levels below 3.1950 should be used to open the short positions.

Technical analysis CHF/PLN: more question marks come in the franc zloty example. The long staying around strong support level can generate higher chances for the rebound. The breakout of 3.4200 level will generate signal to close the short positions. The levels below 3.4000 should encourage sellers to open new positions.