Adam Narczewski
Independent Analyst
Polish Zloty (EUR/PLN) – wow…
Has the impossible happened? Brexit is reality now. What else to say? The Zloty market has been stable throughout the week waiting for the main event. Macro news from Poland? Here you go – the unemployment rate in May declined to 9.2%. That would be it. Now everybody is analyzing what will happen to the Zloty in light of Brexit. MPC member, Jacek Kropiwnicki, mentioned some time ago that the central bank can handle even a 5.0 level of the EUR/PLN. In general, Brexit should not have such a great impact on the Polish economy. The fundamentals are good and in the long term the Zloty should appreciate. Of course, volatility is and will be high. Still, the MPC should not change its monetary policy as it needs to focus on the deflation problem troubling the economy. Nevertheless, the market will be very volatile and extremely hard to trade in the upcoming weeks. Risk has increased and additional caution needs to be take.
From the technical analysis point of view, nothing can be said for sure (it never can, but in this situation even less…). The EUR/PLN has been going south since the beginning of the week as it seemed that British EU supporters are taking advantage before the referendum. The market dropped from 4.41 all the way to 4.34. But then, Brexit has been announced! The EUR/PLN shot up all the way to 4.53 (its highest since December of 2011) easily breaking the crucial 4.50 resistance. As quickly as the market increased, it has declined in the same fashion to 4.45. The stochastic oscillator shows the market has more upward potential. It is really hard to say what can happen next. In order for the EUR/PLN to climb much higher, the 4.50 resistance needs to be broken and the market would need to close the week above that level. A decline could take the market down to the 4.41 support.
Pic.1 EUR/PLN D1 source: xStation
Hungarian Forint (EUR/HUF) – Highest level since January 2015
As with most EM currencies, the HUF has experienced a rollercoaster in the last two days due to the Brexit news. Prime Minister, Victor Orban, quickly commented on the recent situation. He stated that the most important lesson to be learned from this is that Brussels should listen to the voice of people. He noted that we all need to respect the results of the voting in the UK. Orban also stated that Hungary is still in the EU because he still believes in the Union. We believe he was disappointed with the Brexit as he officially supported the UK staying in the EU. The Forint market experienced massive volatility and is expected to remain like this in the upcoming week.
As we see on the daily chart, news from the UK caused a quick, large move from 312 to 322, its highest level since January of 2015. The market has retreated but there is a chance for continuation. For such scenario to happen, the 318 resistance needs to be broken. Otherwise, the market could retreat to the 313 – 314 area.
Adam Narczewski, CFA, PRM – Deputy Regional Director XTB
Balazs Balogh – Market Analyst XTB Hungary
Claudiu Cazacu – Chief Strategist XTB Romania
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