Daily analysis 29.07.2013

The EUR/USD is holding the recent gains. The current week is full of macro data and central bank activity. The great “WSJ” analysis on Fed's members ability to foresee the future economic indicators. Is it a good argument regarding the choice of Fed's next chief? The Polish zloty is stable near 4.23 per the euro.

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

• No macro data which can significantly affect the analyzed pairs

Interesting week. “WSJ” analysis

We have lots of data this week which can both give some new information regarding the world economy and put a light on the current Fed's and ECB's policy. On Wednesday we will receive first major reports from the States – ADP (kind of hint regarding Friday's NFP), GDP (current estimates are around 1% and any reading below that survey will be dollar bearish), and Federal Reserve statement (key whether new forward guidance will be established; committee view on tapering). The next day will be more European – final PMI readings (which can confirm last week's preliminary data) and Mario Draghi conference after the ECB meeting (maybe we will get more details regarding forward guidance; rumors on new communication (minutes) can be confirmed). During the US session we will also get the manufacturing ISM (similar to the PMIs). On Friday we are having the NFP data. Analysts surveyed by Bloomberg estimate that the US economy added 187k jobs in July (any reading over 200k will be dollar bullish). We have recently had also some quite large revisions, so investors will also pay attention the overall changes.

In Today's “The Wall Street Journal” there is an outstanding article on Fed's members ability to foresee the future economic conditions. Jon Hilsenrath and Kristina Peterson in an analysis “Federal Reserve Doves Beat Hawks in Economic Prognosticating” manged to collect more than 700 statements from the Committee members (Summer 2009 – end of 2012). Each statement received a score (minus 1, minus 0.5, 0.0, 0.5, and 1) on a basis how the prediction was accurate. The results was divided into 4 categories – inflation, GDP, employment and overall. According to the “WSJ” the highest score was received by Janet Yellen and William Dudely. They are both the strongest doves in the Fed. Bernanke scored the 5th place. The analysis not only allows to evaluate each Member, but is also a strong argument on the future Fed's chairman nomination. If Yellen gets the job, it will be considered by markets as a bearish dollar singal.

In the following two days the market should be fairly stable and the EUR/USD should be on the bullish side. Later, all will depend on macro data and central banks. Currently there is a higher probability that gains will be continued toward 1.3400, then we fall under 1.30 afterwards.

Stable on the PLN

The EUR/PLN has found kind of short term balance in the 4.20-4.25 range. Until Wednesday the zloty should be traded between that levels. However, the second part of the week will be much more volatile and probably we will move beyond the range. Moreover it will be difficult for the zloty to fall under 4.20 even if we get some dollar bearish data and the sentiment remains positive. On the other hand in case of negative surprise we can quickly move over 4.25 and continue the correction.

The only important news from Polish economy will be PMI reading on Thursday. It is expected (according to the Bloomberg survey) that the manufacturing index will increase to 50.1 (first reading above 50 since 1.5 year).

Expected levels of PLN according to the EUR/USD rate

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

The EUR/USD is still bullish. All Polish pairs are in bearish trends.

Technical analysis EUR/USD:the bullish positions are still preferred. Yesterday we almost touched the target/resistance at 1.3300. The next target is 1.34 (quite strong). Alternatively the slide under 1.3080-50 prefers the shorts.

Technical analysis EUR/PLN: we have reached the first target around 4.22. If the strong support around 4.20-4.22 is broken then the EUR/PLN can slump even toward 4.10-4.13. Alternatively the rise over 4.28 is a buy signal.

Technical analysis USD/PLN: A fall under 3.28 was a sell signal. The USD/PLN target at 3.18-3.14 is almost reached. The next one is around 3.05. A comeback above 3.26 again favors bulls.

Technical analysis CHF/PLN:the first target was reached at 3.42. The strong support is around 3.40. If it falls under 3.40 the next target is around 3.33. Alternatively a rise over 3.48 is a buy singal .

Technical analysis GBP/PLN: the sell signal was generated after sliding under 4.97 with a target around 4.9 and in extension even toward 4.8. Alternatively a rise over 5.04 is an indication of bulls' return.