- In my daily analysis of exotic currency pairs, the chart that I am most interested in at the moment as the British pound against the Polish zloty.
- This is a currency pair that a lot of people will pay attention to, but it is an interesting one as it is so range bound at the moment.
- We are reaching the 5.15 level, an area that has been a significant ceiling, and therefore I think the fact that we pulled back after a little bit of the gains should not be thought of as a major surprise.
That being said, it’s an interesting play on Europe, as the United Kingdom of course has left the European Union, but it is still in a massive trading partner with it. On the other hand, Poland is considered to be a minor economy, so it is further out on the risk appetite spectrum. It is because of this that I think this is a market that could break out above the 5.15 level as we have a lot of concerns out there, which of course would be a major move considering that we have been stuck through the last year or so in this range.
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Overbought?
We also have to keep in mind that this pair could be overbought at the moment, so on signs of exhaustion I believe that this is a pair that could drop back toward the 5.00 level. Underneath there, then the market could see an attempt to get below the 4.95 level, which would be like the bottom falling out in this pair and I think we could see quite a bit of negative pressure at that point. This would obviously be very bad for the British pound, and more likely than not it is very likely that the British pound would be falling apart everywhere.
If we do take off to the upside and break above the 5.15 level, then it’s likely that we could see the risk appetite around the world soffit a bit, and you might see this appear in other markets as well. Either way, as things stand right now it looks like a very range bound market, and you have to assume that it will be more of the same going forward.
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