Chart of the Day: After Rocketing, Polish Zloty at a Crossroads

11/16/2022

2 minutes read

2022.11.16 07:31

[ad_1]

Concerns of a widening Russia-Ukraine conflict increased today after Poland claimed a Russian rocket landed on a Polish village, killing two Polish citizens. However, President Joseph Biden later told reporters at the G20 summit that the missile was a Ukrainian .

Surprisingly, given the dramatic developments, there were only mild fluctuations in the . The USD/PLN wavered between a 1.18% intraday high and a 1.73% intraday low.

On Sept. 28, the zloty fell to an all-time low, I assumed, due to the war in its neighboring country. However, the , , and also fell to all-time lows on the same day.

USD/PLN Monthly

The USD/PLN has been trading within a constricting monthly rising channel since the February 2009 rebound high, following the July 2008 bottom. The pair has fallen below its 2000 record peak and is retesting the top of the monthly channel. I don’t consider the channel a wedge because that pattern and its traders’ motives take months, not decades. USD/PLN Weekly
The dollar climbed versus the zloty in a narrower, escalating channel. The lower-than-expected print prompted a dollar selloff last Thursday and Friday, pushing the USD/PLN below the most recent, steepest channel.

The dollar is down for the sixth straight week versus the zloty but is developing a weekly high wave candle, suggesting that the pair could rebound or stall. The location is on the dual support of the previous two channel tops, marked by the X.

If the price rebounds, it could extend its medium-term uptrend at a more sustainable ascent. Alternatively, it could be a short-lived rebound to the 4.8-9 levels, a return move after the steepest channel’s breakout, which could be the making of an H&S top.

USD/PLN Daily
The dollar-zloty pair is potentially forming a rising channel, bearish after the preceding 5% plunge in just two days, as investors’ risk appetite rerouted capital from the dollar haven to risk assets. A flag requires at least five sessions to have stretched the technical spring tightly enough to include all the interest that pulled it down in last week’s selloff to shoot it down again with the same tenacity.

If the pair falls below the flag, at least after Thursday’s close, it will have all the technical energy to fall to the bottom of the next channel. However, if the price breaks the flag to the topside, we’ll have to wait and see whether it will climb above its previous channel or extend an H&S top.