Technicals In Focus As USD/PLN Rallies Through 4.0 To Test 200-DMA

EUR/PLN charts another bullish candlestick on the heels of two days of gains in a row. Today's move has allowed the pair to convincingly breach the 50-EMA, which capped price action in the second half of March. Trading activity over these three days has been reminiscent of a "three white soldiers" candlestick pattern, albeit it remains to be seen if the pair manages to cling onto this morning's gains on a closing basis. If it does, bulls will seek a move towards Feb 7 high of 4.3564. When this is being typed, EUR/PLN trades +157 pips at 4.3200.

• Recent USD strength seems to bear at least part of the responsibility for weakness in the EM FX space, with the BBDXY Index gaining 1.9% since Apr 9. This coincided with a 3.7% rally in USD/PLN, with the pair pushing through the psychologically significant 4.0000 figure and Mar 28 high of 4.0089 in what appears to be a short-term double bottom pattern. This plays into a more complex bullish reversal structure, with USD/PLN testing the territory above Feb 14 high of 4.0671 and the 200-DMA at 4.0719. A sustained break above these levels is needed to confirm that bulls are indeed on the offensive.
• These developments have overshadowed the lack of major domestic catalysts. Today's release of core CPI data by the NBP is unlikely to move the needle, as most sell-side desks are able to predict the outcome based on final CPI data with considerable accuracy.

Fig. 1: USD/PLN