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Polish Zloty turns bullish on strong economic growth

polish zlotyThe USDPLN pair hit a high of 4.1550 on Jan 26th, 2016. It was the same day when the crude oil hit a low of $25 per barrel. As the crude started recovering, the US dollar started declining against most of the currencies and the Polish Zloty was not an exception. Last week, the USDPLN hit a low of 3.7651. However, the strengthening of the US dollar in the past few days has caused an uptrend in the USDPLN currency pair.

Now, the question which arises in a trader’s mind is whether there will be a sustained uptrend in the USDPLN pair. To find a solution for the query, we shall look into the factors which caused the strengthening of the Polish Zloty.

The $425 billion Polish economy, sixth largest in Europe, registered a 3.6% growth rate in the fiscal 2015. The recorded growth rate is the fastest in the past four years. In the last quarter of fiscal 2015, the GDP growth rate hit a high of 3.8%. The significance of the growth rate can be understood by the fact that it is twice the average growth rate of the Euro zone. The GDP growth is expected to hit a high of 3.6% in the fiscal 2016.

Emerging Europe: 5 Jun 2014

The government expects the unemployment rate to decline to 7.5% in 2015, from 9% in 2014. In the fiscal 2015, the private consumption growth also registered a 3.1% increase, from 2.6% in the fiscal 2014. The country is expected to have a fiscal deficit of about 3.5% of GDP. The member states of the European Union are expected to maintain a fiscal deficit less than 3% of GDP. In this regard, the Organization for Economic Cooperation and Development (OECD) issued a warning to Poland.

However, it should be noted that 25 out of 28 Euro zone countries have already broken the rules. So, it is no longer a concern as long as the deficit gap does not widen further.

The impressive macroeconomic fundamentals can be expected to strengthen the Zloty further against the US dollar.

Technically, the price action has resulted in the formation of a head and shoulder pattern in the chart. The neckline at 3.90 levels is already broken and the price is on its course to hit the minor target at 3.74 and major target at 3.66. Thus, any intermediate uptrend should be used only as an opportunity to take a short position.

USD/PLN Pair: March 24th 2016

USD/PLN Pair: March 24th 2016

A forex trader should take a short position between 3.80 and 3.82 levels with a stop loss order above 3.82. The position can be closed when the price falls below 3.68 levels. The risk to reward ratio for the trade is 1:4. The target is expected to be achieved in a month’s time.

A binary options trader should purchase a one touch put option contract. The target level for the trade should be preferably around 1.75. The trader should choose an expiry date in the last week of April.


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