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/CZK: Key Support Levels In Sight, Central Banks Draw Attention

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PLN/CZK remains locked in a downtrend, despite bouncing off fresh three-and-a-half-month lows (CZK5.0241) printed today to last trade +150 pips at CZK5.0544. Looking through today's uptick, the rate is gravitating towards key support from Jul 13/Oct 7 lows of CZK5.0160/5.0097, followed by the psychological CZK5.0000 figure.

  • A break below this area would represent an important technical development, allowing PLN/CZK to drop to an all-time low. Bulls look for a rebound above Nov 16 low/round figure of CZK5.0872/5.1000 to get some temporary reprieve before targeting Jan 11 high of CZK5.1372.
  • The recent move lower has coincided with the tightening in CZGB/POLGB yield spread, with 10-year differential last seen at ~147bp. That said, the strength of the narrowing trend in relative yields has been less evident than exchange rate depreciation, as the 10-year gap in yields is struggling to break above its recent tights.
  • Czechia's PX index has outperformed Poland's WIG20, even as the former charted a 50-DMA/200-DMA golden cross pattern earlier this month. Topside momentum in the WIG20 has waned somewhat, with the index catching hiccups again on the back of well-documented mortgage holiday extension talk. By contrast, the Czech benchmark keeps refreshing multi-month highs.
  • Both the NBP and the CNB are dominated by dovish majorities, which advocate interest-rate stability. However, some Polish policymakers have already been toying with the idea of cutting interest rate towards the year-end, while communique from Czech doves stresses the need to keep monetary settings tighter for longer.
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PLN/CZK remains locked in a downtrend, despite bouncing off fresh three-and-a-half-month lows (CZK5.0241) printed today to last trade +150 pips at CZK5.0544. Looking through today's uptick, the rate is gravitating towards key support from Jul 13/Oct 7 lows of CZK5.0160/5.0097, followed by the psychological CZK5.0000 figure.

  • A break below this area would represent an important technical development, allowing PLN/CZK to drop to an all-time low. Bulls look for a rebound above Nov 16 low/round figure of CZK5.0872/5.1000 to get some temporary reprieve before targeting Jan 11 high of CZK5.1372.
  • The recent move lower has coincided with the tightening in CZGB/POLGB yield spread, with 10-year differential last seen at ~147bp. That said, the strength of the narrowing trend in relative yields has been less evident than exchange rate depreciation, as the 10-year gap in yields is struggling to break above its recent tights.
  • Czechia's PX index has outperformed Poland's WIG20, even as the former charted a 50-DMA/200-DMA golden cross pattern earlier this month. Topside momentum in the WIG20 has waned somewhat, with the index catching hiccups again on the back of well-documented mortgage holiday extension talk. By contrast, the Czech benchmark keeps refreshing multi-month highs.
  • Both the NBP and the CNB are dominated by dovish majorities, which advocate interest-rate stability. However, some Polish policymakers have already been toying with the idea of cutting interest rate towards the year-end, while communique from Czech doves stresses the need to keep monetary settings tighter for longer.