This week has seen the the Polish zloty strengthen slightly against the euro, rising from 4.28 to the 4.2650-4.2750 area. USDPLN, meanwhile, closed Monday's session at 3.6548; this has changed the market trend (on a daily Ichimoku chart basis) to a downtrend and given the signal to sell.
The risk-off tone linked to the Turkish lira and its contagion into other emerging market currencies at the beginning of August weakened the zloty by 2.3% and 5.2% versus the euro and the US dollar respectively. The PLN and the Warsaw Stock Exchange are usually quite fragile to EM developments.
From a technical analysis standpoint, the Turkish lira has been stabilising after a period of high volatility for the past week and this improved the mood on the Polish zloty. This week, the lira again started a renewed fall against the dollar, but the zloty is surprisingly proving very stable this far.
After a sell signal and trend change at the close of Monday’s session, USDPLN has been consolidating. Prices are below the Ichimoku cloud, meaning that the instrument is in a downtrend. The next support areas are located at 3.64 and then 3.5950. The nearest resistance levels are at 3.6757-3.6882 (span B line).
On the other hand, EURPLN has been in a downward movement on the daily Ichimoku chart since August 16. Yesterday, the tenkan sen line (red line) crossed below the kinjun sen line (blue line) on the daily chart. This shows positive sentiment for the Polish zloty that should bring the currency pair closer to the nearest support level at 4.2450 (blue line). It is worth noting that just below the support level we have a neckline (purple line) of a massive head-and-shoulders pattern. In case of a breakout below the neckline (located at around 4.24), we would have a signal to sell with a minimum target of 4.08.
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