While Poland’s squad missed its second straight World Cup this year, Poles may take a small bit of solace from the performance of their currency over the past few weeks. The Polish zloty may not be a currency pair traders typically focus on, but it can offer strong opportunities when the stars align properly.
After consolidating around 4.18 for the first five months of the year, the EUR/PLN finally broke lower at the end of May and has since shed over 700 pips down to 4.09. Rates are bouncing back this week, but based on the technical evidence that we follow, the current bounce may simply represent in oversold bounce within a prolonged downtrend.
Looking to the chart, the pair has sold off strongly since breaking below its 5-month symmetrical triangle last month. Though we’ve seen a strong bounce back this week, the trend is still clearly to the downside, with both the 50- and 200-day moving averages trending lower. Meanwhile, the secondary indicators are also painting a bearish picture: the MACD trending lower below its signal line and the 0 level, and despite this week’s oversold bounce, the RSI remains trapped within its bearish channel.
Given all the bearish evidence, we’re skeptical that the recent bounce represents a sustainable bottom. As long as the EUR/PLN stays below previous-support-turned-resistance at 4.1370, the longer-term bias will remain to the downside and sell trades will be favored. If we do see this week’s rally stall out, a move back down to the 17-month low at 4.09, or even the symmetrical triangle measured move target around 4.0450, may be seen this summer.