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Strong USD Leaves Polish Equities ‘Vulnerable’

POLAND
  • USDPLN has been retracing slightly higher this week amid broad USD strength after finding support at the 4.5820 level on Monday, which corresponds to the 61.8% Fibo retracement of the 4.1450 – 4.8520 range.
  • The PLN weakness has been weighing on domestic equities, with WIG20 index falling back below its 50DMA.
  • Polish equities remain in a bear market with WIG20 index down over 30% since its January high.
  • As previously mentioned, we would need to see a sustain period of USD weakness (i.e. significant ease in risk aversion) to see a potential positive bull retracement on domestic equities.
  • The chart below shows the strong co-movement between USDPLN and WIG20 Index in the past cycle; periods of PLN weakness have been associated with falling equities and vice versa.

Source: Bloomberg/MNI

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