The PLN market weekly overview - Global factors help the PLN

Adam Narczewski Independent Analyst

The Polish Zloty is experiencing a strong beginning of the year. Its appreciation began by the end of last year, when the central bank intervened on the currency market by selling foreign currencies (mainly the Euro) and buying the PLN. In the first two weeks of 2018 we have seen a rebound on the EUR/PLN while a continuation of the downward movement on the USD/PLN. Why such divergence? We have the stock markets reaching new highs and risk aversion is lower. Also, the USD is struggling these days after the news that China might stop buying U.S bonds.That is just a gossip, not confirmed, but the reaction of the market (especially EUR/USD) was strong. Times are very exciting also on the local market. The interest rate decision by the MPC to keep interest rates unchanged (at its lowest historical level of 1.5%) was the least important news. The central bank has confirmed (again) that it has no plans in hiking interest rates in 2018. What was the big news then? The reconstruction of the government. The new Prime Minister, Mateusz Morawiecki (former CEO of one of the largest Polish banks - BZ WBK), has made changes on some crucial positions (including the Minister of Defense, Minister of Health and the Minister of Finance). Many issues (situation in the health sector, Poland - European Union relationship and many more) require immediate attention and we will see how the new government handles them.

As we see on the daily chart, the EUR/PLN has reached lows of just above 4.14, its lowest since August of 2015. The rebound took the market back to 4.19 but it seems PLN bulls are back in the game. Breaking the 4.16 support should take the market back to 4.14. If this lows are broken, the EUR/PLN will have the door open to attack the 4.10 area. Those expecting a depreciation of the PLN will have their signals confirmed if the market breaks the 4.19 resistance level.

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

The situation on the USD/PLN pair is different. After breaking the crucial 3.52 support, the market continued its way south. The stochastic oscillator tells us the market has been oversold for some time already, but hoping for a rebound now is exactly just “hope”. If the global macro situation does not change, the USD/PLN has a big chance of breaking the 3.43 lows and head towards its next stop - 3.40. In case of a rebound (if it does happen), the first target will be 3.47.

Pic.2 USDPLN-ECN W1 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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