To make sure it is worth investing in Polish currency, we will have to conduct a thorough research about the Polish economy. After defining the macroeconomic status of the Polish Zloty, we will switch to charts to analyze where the best entries could be located. So, stay tuned.
The universal way to predict any currency of any country
The best way to know if it is worth investing in any currency is to analyze the underlying economy fundamentally, and then use charts and technical indicators to see where the psychological and important support and resistance zones are located. Traders use technical analysis and investors have more relied on fundamental factors. However, it is best to combine the two to increase the accuracy of trading and investing decisions. So our plan in this article will start with the macroeconomic analysis of the Polish economy to get a better idea of what it is going to do in 2023. After fundamentals, we will switch to the technical side of the analysis with price charts and set important zones for stop loss and take profit targets. Check Stop Loss and Take Profit orders illustrated to get a better understanding of how to use SL and TP. These methods can be applied to any currency in the world, and it will make it much easier to predict what possible trends could be. No one has a magic ball to predict currency with 100% accuracy, the main idea is to make sense of what the economy is doing and how it will be reflected in its currency price.
Fundamental analysis of the Polish economy
The GDP and inflation forecasts for Poland don’t seem good for the economy and should indicate that in 2023 Polish Zloty is going to get weaker. Macroeconomic factors like GDP and inflation are two of the factors from major indicators that have the highest impact on fiat currencies. When Gross Domestic Product is declining, it is mostly a recession side effect and always reflects negatively on the economy of any country. Inflation itself is the exact occurrence of currency weakening and rising inflation directly affects currency’s buying power, making it hard for average citizens to buy consumer products. Since the projected GDP is smaller than in 2022 for Poland and an inflation spike is also predicted, we can firmly say that Polish Zloty will be in trouble in 2023.
From Dec. 2022 the Unemployment rate, another good predictor of currency’s strength, started rising from the previous month’s 5.1 percent to 5.2 percent and has been increasing monthly ever since. This also adds more likelihood of the Polish currency weakening during 2023.
So, it is not a good idea to buy and hold the PLN from an investor’s perspective, as all fundamentals are predicting the currency to be weakening during 2023. However, we can safely assume that traders should have a good time shorting the PLN by buying the USD/PLN and EUR/PLN pairs. For traders, we will analyze price charts in more detail below.
Switching to charts: technical analysis of Zloty
Seems like the price got rejected from the 4.50 level and after a struggle for weeks finally decided to surrender and decrease. What this means is that while the economy and fundamentals indicate an uptrend for USD/PLN, the technical side is in the opposite state. So, it is most likely that the price will fall for some time before it reaches the support level at the 4.27 zone and there we shall see if the price is going to respect the fundamentals and switch to an uptrend.
Source: TradingView USD/PLN price charts.
It is also possible to see a channel with sideways market movements between the two zones we mentioned above.
Switching to EUR/PLN charts the picture is a bit different, the pair is characterized by strong movement impulses with strong price declines following. It is also noteworthy that the European energy crisis is about to start declining because of the warm winter slowly residing. This will make the Euro stronger, while all fundamentals for Zloty are on the bearish side. From the fundamental point of view, the EUR/PLN pair should start trending upward soon.
The current strong support zone is located at the 4.67 level, and it prevented the price from declining further earlier, it should take up some fight if the price decides to test it again. 4.625 is another support zone below 4.67, and it is more powerful. If the price decides to agree with fundamentals and starts rising, the next resistance zone is located at the 4.79 zone.
In the case of trading the EUR/PLN, these zones should provide very strong entry and exit points for maximizing profits while reducing the risks of losses during the 2023 time period.
Conclusion
As we have seen, the fundamentals are not on Zloty’s side, with GDP weakening and inflation and unemployment rates on the rise it will be a bad idea to buy and hold the Polish currency from the investor’s point of view. However, traders can take advantage of the fundamentals and short the PLN by buying USD/PLN and EUR/PLN when the price rejects the strong zones and starts moving up. Support levels for USD/PLN are located at 4.27 and for EUR/PLN at 4.67 and 4.625. It is necessary to conduct a thorough analysis of fundamentals before investing in any currency and when applied to trading the results could be even better.