Adam Narczewski
Independent Analyst
The Polish Zloty is not eager to depreciate. The situation in the economy is good, as most of the published macro reports prove (maybe besides last week’s industrial production numbers). The unemployment rate dropped to 7.7%, the lowest level in 26 years. The MPC has no plans to hike interest rates this year so traders were worried that the Fed’s actions might depreciate the Zloty. The last FOMC meeting minutes showed though, that some members are not so confident the U.S central bank should be hiking interest rates so quickly (already done that in March, another hike expected in June and one more this year). Inflation in the U.S is not increasing as fast as expected and recent macro data publications were not so optimistic. Such news of course help the Polish Zloty, which remains at its 2-year lowest levels against the Euro and 1-year lows against the U.S Dollar. Some action can be expected next week if the published final Q1 GDP report differs from the first publication (reminder: 4%). We will also learn the industrial PMI number for May.
As we see on the daily chart, the EUR/PLN experienced a sharp decline at the beginning of the week and is trading close to the 4.16 support. If this level is broken, the way to even 4.10 will be opened. On the other hand, we see the market is oversold (as the stochastic oscillator shows) and we could see a rebound. If so, the market will be targeting the 4.20 area.
Pic.1 EURPLN-ECN D1 Source: MT4 Supreme Edition, Admiral Markets
The USD/PLN continued its way down and reached the lowest levels since march of 2016. The market is trading close to the crucial 3.70 support and breaking it could trigger a move towards 3.65. On the other hand, the USD/PLN needs a breather. The market is oversold (again, stochastic oscillator) and a rebound could be seen next week. This scenario is possible as the last downward move (april may) is of the same magnitude as that of the december-january period. In this case, the target could be the 3.76 level.
Pic.2 USDPLN-ECN D1 Source: MT4 Supreme Edition, Admiral Markets
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