EURPLN for just 4,40 PLN, and maybe even ...

The EURPLN rate shot up strongly today, rising above PLN 4,38. In a moment the euro should attack the PLN 4,40 barrier, and then maybe even around PLN 4,50.

The jump in EUR / PLN is the result of a further increase in uncertainty on global markets (this can be seen especially on the stock exchanges) and the associated risk escape, which is rooted in fear of coronavirus outbreak and its strongly negative economic consequences.

What are the markets afraid of?

First of all, that controlling the epidemic must lead to a drastic reduction in the mobility of society, which will have a strong negative impact on economic performance. Especially in developed countries, where growth is built on services. Secondly, they fear that central banks no longer have ammunition to stop the economic crisis. And thirdly, they realize that before eventually governments decide on a coordinated fiscal stimulus, the epidemic must be stopped sooner.

Investors not only run away from risk, but also from emerging markets, which further explains the weakness of the zloty.

The balance of strength on the EUR / PLN daily chart suggests that there will be an attack on the psychological barrier of 4,40 PLN, from where the euro returned in August and September. However, the dynamics of the upward movement are so high that it is uncertain whether this resistance will stop the demand attack.

EUR / PLN chart, D1 interval. Source: MT4 Tickmill.

The situation on the weekly chart suggests that this can be a difficult task. What's more, such an attack may not stop the July 2018 summit at 4,4131 PLN. And this means that only such a chance will appear around 4,50 PLN. And if you look at what is happening around and confront with the growing chances for future interest rate cuts also in Poland or lower and lower forecasts of economic growth, then a test of around 4,50 zlotys is real.

EUR / PLN chart, W1 interval. Source: MT4 Tickmill.