Adam Narczewski
Independent Analyst
What a sensational turn of events! The previous week ended with the Polish parliament passing three acts regarding the judicial power. In short, the three regulations gave full power to the minister of justice (being the General Prosecutor at the same time) to fire and choose judges to the Supreme and general courts. If those acts were signed by the President, that could trigger article 7 of the European Union treaty (which in turn would drastically affect the Polish economy). This week though, the Polish President vetoed two out of the three acts. It is a big surprise as till that day, it seemed the President will not vote against its own party (the ruling party, Law and Justice). Is this the end of love between Andrzej Duda (President) and Jaroslaw Kaczynski (informal leader of the party)? Everybody wonders. For sure this is a huge defeat for the government, which wanted to have judges under full control. From the macro side, the unemployment rate in June dropped to 7.1% and according to the government, it will keep declining. So in general, it a was great week for Zloty - besides the internal political situation turnaround, the positive sentiment and gaining Euro helped the local currency.
As we see on the daily chart, The EUR/PLN rebounded from the 4.20 support and shot north dynamically by the end of last week. It broke the 4.24 resistance and continued its upward move to reach 4.27, its highest level since April of this year. After the President vetoed the acts, the PLN regained some ground. Still ,the situation is far from being solved. That is why it will be hard for the Zloty to break the 4.24 support. If it happens, it will be back in the wide 4.15 - 4.24 trading range. The market is overbought (as shown by the stochastic oscillator) but there is still upward potential. The first target will be 4.27 while the next - 4.29.
Pic.1 EURPLN-ECN D1 Source: MT4 Supreme Edition, Admiral Markets
As for the USD/PLN, the situation has not changed much from the previous week. The USD is still weak and the market is heading towards lower levels. The stochastic oscillator shows the market is oversold and that we should expect a rebound. If so, the USD/PLN will target 3.66. Nevertheless, it seems that in the middle term the market is aiming to reach the 3.52 support.
Pic.2 USDPLN-ECN W1 Source: MT4 Supreme Edition, Admiral Markets
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