EURPLN and USDPLN weekly snap - Polish Zloty hurt by global sentiment
|The last couple of weeks have been tough for the Polish Zloty (PLN) and other emerging markets' currencies. The main reason is the negative global sentiment towards riskier investments with increased risk aversion.The trade war between China and USA is getting nasty although in my opinion it will all end well. Both countries have too much to lose. Also, the presidential and parliamentary elections in Turkey coming up this sunday are making traders nervous. We have to remember about the Fed hiking interest rates and the ECB cutting its QE plan. All of these factors affected the PLN, which has been quickly depreciating since mid march. The last 2 weeks we have a seen a corrective movement but this past week the PLN has been one of the worst performers among EM currencies. The global sentiment is the main driver but also the published local macro data was below expectations. Average wages in may increased by 7% (yearly basis) while decreased 3% on a monthly basis. Industrial production grew by only 5.4% in may (yearly basis) while the PPI stood at 2.8%. It has to be noticed, that worse macro data is not a trend. The economy is doing fine and is expected to grow. So while analyzing the PLN, we need to focus mainly on the external factors. Currently, the global situation is nervous and it caused both the EUr/PLN and the USD/PLN to reach crucial resistance levels.
The EUR/PLN bounced from the 4.27 support and is currently fighting at the 4.32 - 4.33 resistance. This level has already been touched in may but the market retreated. If the EUR/PLN breaks this resistance level, it could possibly jump to the next target - 4.36, which is the 61.8% retracement level of the last long term downward move. I expect the market will calm down though. In my opinion, next week we will see the EUR/PLN at lower levels, maybe heading towards 4.27. This scenario will be denied if sunday's elections in Turkey create turmoil on the market.
Pic. 1 EUR/PLN W1 Source: Meta Trader 4 Supreme Edition. Admiral Markets.
The USD/PLN trades in a similar pattern like the EUR/PLN although with small differences. The market actually broke the 3.68 resistance (38.2% retracement level of the last long term downward move) but is unable to follow the upward movement. Like in may, the USD/PLN reached local highs of 3.75 but is giving up the gains. It seems the target for the market is 3.79. I believe though that like with the EUR, the Polish Zloty will regain some ground agains the USD and next week the USD/PLN could be trading at levels below 3.68 (again, watch out for Turkey).
Pic. 2 USD/PLN W1 Source: Meta Trader 4 Supreme Edition. Admiral Markets.
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