Strength of calm of the zloty, but prospects still weak PLN market analysis

While the wave of sales of Brazilian real and Turkish lira is sweeping the markets, the Bank of Czech Republic unexpectedly cuts interest rates by as much as 75 basis points, bringing the main one down to 0,25 percent, and Polish politics is confused as at the presidential election date, the zloty remains calm. On Thursday it remained stable against the euro and the Swiss franc, and only slightly lost against the dollar strengthening today. The only thing that worked against him was the fact that he failed to strengthen against these three currencies in response to improved sentiment in global equity markets (US indices rose 1,4%, German DAX 1%, and WIG20 2,1%).

PLN remains extremely stable

This calm of the zloty is still calm before the storm. What is worrying is the fact that it did not strengthen considerably, bearing at the same time a large part of the February-March sell-off, on the wave of improvement in financial market sentiment observed since the second half of March. In this context, the last month, which is quite limited by the last fluctuation standards, seems to be a stop for further weakening rather than preparing to return to the level from the beginning of the year. Lack of certainty as to how deep the recession will be in Poland does not help the zloty either. Just like the situation in Turkey or Brazil. Finally, the prospect of another interest rate cut by the Monetary Policy Council still hangs over it, which may occur as early as May 28.

The situation on the charts of Polish couples confirms the above thesis about the calm before the storm. The EUR / PLN chart remains above the strong support zone around 4,50 PLN, with the missing wave 5 visible in the growth structure. Slowly returning MACD, but also indications of other oscillators, may even suggest that this correction of the March rally is coming to an end. Thus, the risk of returning to around 4,63 PLN increases.

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

The situation on the USD / PLN daily chart looks very similar. The only difference is that here the consolidation, which took the form of the flag formation, can be completed soon. The consequence of this would be another attack on the area above PLN 4,30. An attack that would most likely end in the breaking of the March summit.

Chart USD / PLN, D1 interval. Source: MT4 Tickmill.