The PLN market weekly overview - can the PLN go even stronger?

Adam Narczewski Independent Analyst

The French elections topic is gone, now Donald Trump is back in the spotlight. It is not the economy what is being discussed but the U.S president’s alleged pressuring former FBI director, James Comey, to resign from the investigation about the ties of Trump’s advisor with Russian officials. There are even voices about starting the impeachment procedure. That is not helping the markets and it is increasing geopolitical risk. The Zloty market though remains relatively strong. This past week was much more rich in macro data publications than the previous one. Core CPI in April (yearly basis) remained at 2% while the first quarter’s GDP grew by 4% (more than expected). The stronger growth and signs of possible increase in inflation, has not caused any moves by the MPC which kept interest rates unchanged at 1.5%. It seems the first hike could happen the earliest in the first quarter of 2018. From other macro news: average wages in April (yearly basis) increased by 4.1%, which was lower than expectations. There is pressure though on emerging market currencies as stock indices are negatively reacting to what is going on in the U.S.

The Polish Zloty remains at its 2-year lows, this time reaching 4.16. The increasing risk aversion brought the market back to the 4.20 area. The rebound is strong and there is a chance the EUR/PLN will be testing the 4.24 resistance next week. Breaking it, should trigger a move towards 4.28. If the positive sentiment is back on the markets, the EUR/PLN will be targeting the 4.16 support. The stochastic oscillator is inconclusive this time.

Pic.1 EURPLN-ECN D1 Source: MT4 Supreme Edition, Admiral Markets

The Zloty took advantage of the weakening U.S dollar. The USD/PLN broke the 3.81 support and continued its descent to reach 3.75, its lowest since april of 2016. The market has rebounded since then, but it needs to break back 3.81 in order to attack the 3.87 level. The stochastic oscillator suggest such a scenario as the market seems to be oversold. On the other hand, if the USD/PLN break the 3.75 support, the next target will be 3.70.

Pic.2 USDPLN-ECN D1 Source: MT4 Supreme Edition, Admiral Markets

Author

Adam Narczewski

Independent Analyst

Independent analyst and trader. Adam holds the CFA (Chartered Financial Analyst) and the PRM (Professional Risk Manager) titles.

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