Daily analysis 30.07.2013

Low volatility on the EUR/USD. The market is in “waiting mode” before the second half of the week. Will ECB start publishing minutes? Contradictory opinions form banks regarding the developments in the next few days.

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

• 16.00 CET: Conference Board from the US (survey: 81.3)

Wait-and-see. ECB. Opposite estimates.

The recent hours hasn't brought any changes on the analyzed pairs. We can only note a steep slide on the AUD pairs after RBA governor dovish comments. However, it didn't affect the EUR/USD. The market is still waiting form the second part of the week.

It is possible that the ECB will publish minutes after the Central Bank meetings. “The Wall Street Journal” published an article based on an interview from Sueddeutsche Zeitung and Le Figaro with ECB board members Benoit Coeure and Joerg Asmussen. They both support more transparency regarding the ECB decisions. Currently we have only a limited amount of data (journalists sometimes ask Mario Draghi whether the voting was unanimous or not) on the decision process. The “WSJ” cites also an analyst from Nomura who claims that “We view the eventual publication of ECB minutes as a positive development that would help improve transparency and communication”. On the other hand the daily newspaper notes that “Identifying how officials voted or what they advocated could put them under political scrutiny in their home countries and make it harder for them to act independently”. However, Coeure says that “The governors of the national central banks come here in a personal capacity – the do not represent their institutions or their countries – and should be accountable for what they do.” It looks like that the ECB will start publishing the minutes pretty soon. Some more info we should expect during Mario Draghi conference on Thursday (reports will probably try to get more info on the case).

Before important events there are sometimes contradictory views form major financial institutions. Today we are facing a similar case. Strategies form Barclays claim that it is worth to stay short on the EUR/USD with the target around 1.28. The major arguments are that “forward guidance will be on spotlight on Thursday's ECB meeting [dovish, negative for the EUR/USD – author's note], Fed will have limited scope for a more dovish language then expected and U.S. data may be strong”. On the other hand BNP Paribas notes that “ECB won't introduce any new dovish innovations at this week's meeting [euro bullish – author's note], while FOMC statement will stress data contingent nature of tapering and may choose to lower unemployment trigger for hiking rates [dollar bearish – author's note]”.

Summarizing the EUR/USD is still bullish, so the deeper correction is not likely till Wednesday. Regarding the second part of the week all will depend on the data and central banks statements. If the arguments will be supporting to sell the dollar then we can see a rally on the EUR/USD exceeding 1.3400.

Again around 4.20

Yesterday we had another attempt to slide under 4.20. The move was generated without a solid reason or even against the current trends – the EUR/USD was slightly correction and the closest correlated with the zloty pair – EUR/HUF was rising. However, I wouldn't see it as a major shift in the sentiment. There should be a strong impulse to slide under 4.20. Duringthe morning session in Europe came back to 4.22 level. On the other hand if the published in the second half of the week data supports the EUR/USD and is combined with solid PMI reading form Poland (over 51) then we can expect a slide under 4.20.

The base case scenario is still range trade between 4.22-4.25. Later I would rather see more zloty weakness unless the data is bullish for the PLN and EUR/USD rises over 1.34.

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.