It is, isn't it? One week we hear that the trade war is starting, the next we get information that there is a chance for a deal. Italy is back in the game with its budget. At the same time, the hawkish policy of the Fed is criticized by Donald Trump. The sum of all these factors caused a major corrective movement on the U.S equity market. Still, I do not belive this is the beginning of a big slump, which in turn could cause a massive depreciation of emerging market currencies. Yields of 10y treausry bonds dropped a little bit and the macro news from China for September are optimistic (higher exports turning into a trade surplus). What is also important, is the lower than expected inflation in the U.S (despite increasing oil prices). This fact does not mean the Fed will drop its hawkish stance, but gave a breather to the market. On the local market we lacked important macro data publications. We learned though, that the Polish central bank increased its gold reserves by over 9 tons (buying in July and August). That should not worry investors as this should not be treated as a defensive move. The central bank should have done it way before and this purchase of gold was the first one since 1998. Next week should be more interesting as the statistical office will publish the CPI, Core CPI, PPI, Average wages, Industrial production and Retail sales data, all for September.
The Zloty started the week by attacking the 4.32 resistance againt the EUR but was unable to break it. Despite the large corrective movements on equity markets (which in turn increased risk aversion), the PLN behaved pretty stable. It is back in the 4.28 - 4.32 range, in which it has been traded for the last 2 months. So the analysis here does not change much - breaking either level will trigger a major move. Targets for the EUR/PLN should be 4.36 (if the resistance is broken) and 4.25 and 4.21 (if the support is broken).
Pic. 1 EUR/PLN W1 Source: Meta Trader 4 Supreme Edition. Admiral Markets.
The USD/PLN also started the week in a strong fashion and it seemed it might attack 3.80. As with the EUR/PLN, the Zloty regained ground, pulling back the USD/PLN towards 3.70. Here, the market still has some distance to the crucial support and resistance levels. There are lower chances that the market will test the 3.80 resistance. Rather, I see the USD/PLN heading south to test 3.67. If this is broken, the market will target 3.64.
Pic. 2 USD/PLN W1 Source: Meta Trader 4 Supreme Edition. Admiral Markets.
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