A Polish Play

Published on
August 10th, 2018
Topic
Trading, Euro, FX
Duration
8 minutes
Asset class
Currencies

A Polish Play

Trade Ideas ·
Featuring Joseph Trevisani

Published on: August 10th, 2018 • Duration: 8 minutes • Asset Class: Currencies • Topic: Trading, Euro, FX

Joseph Trevisani, Senior Analyst at FXStreet, highlights the Polish zloty as a way to short the euro. He explains his analysis and the key levels to watch in this interview with Justine Underhill. Filmed on August 6, 2018.

Comments

  • sw
    ssa w.
    15 August 2018 @ 23:38
    Well Turkey weights on this trade idea now, however I would agree with the summary. I see a lot of foreign investments here, and also immigration from Ukraine, Belarus and Russia helps to grow; over 2 mln migrants from those countries are in the workforce now in PL. Moreover USA plans to help Poland build major port for LNG (shell gas) in Europe - to step away from Russian gas, which will make costs of energy cheaper for Poland. Biggest risk is high foreign currency debt to GDP ratio, especially to swiss frank, milions of households took morgage in CHF (thats highest in the world ratio for household foreign currency debt).
  • RK
    Robert K.
    14 August 2018 @ 23:18
    Not convinced. If you look at the weakly chart ERUPLN is pretty much balanced - no clear hint on direction. Also you are ignoring the current deteoriation of Poland and the nationalistic backward tendencies (e.g. banks are being bought up by the state). Capital will probably flee the country so I would argue it is downhill for Poland from here.
  • JJ
    Justin J.
    12 August 2018 @ 23:00
    Looks like a H&S forming. Not to confident of it coming to fruition though
  • AG
    Andrew G.
    10 August 2018 @ 20:48
    Almost as embarrassing as me posting my comment twice
  • AG
    Andrew G.
    10 August 2018 @ 20:38
    Good going, Real Vision. You used an image of a banknote that was withdrawn from circulation in 1994 for the background above. Truly embarrassing.
    • M.
      Milton .. | Founder
      14 August 2018 @ 10:01
      Hi Andrew, We apologize for this error and thank you for signalling this. The image has been changed. M
  • AG
    Andrew G.
    10 August 2018 @ 20:38
    Good going, Real Vision. You used an image of a banknote that was withdrawn from circulation in 1994 for the background above. Truly embarrassing.
  • GO
    Greg O.
    10 August 2018 @ 11:31
    Joseph, In my opinion, this trade has extremely low probability of working out for several reasons. You are making serious mistakes in your analysis because you're not familiar with the local market. Being in PL, allow me to make several key points: 1. The Syrian/African "refugees" (not immigration as you said) policy dispute is not a big deal (for PL) as it seems to you. Look at Germany (the heart of the problem - Merkel), 50% of population there are agains these policies... 2. If one is bearish on EU, any slowdown there will hit Polish economy as well. While our economy has a great internal market, we have a good deal of exposure to EU. 3. The true problem is undermining (in fact breaking) the Constitution and Judicial Branch to the point we are getting truly at "war" with EU. We are facing huge consequences from EU including trimming of EU (EUR) budget flows that would have huge implications for our currency market 5. The current growth has nothing to do with current government, they just benefited the upside in economy even more so than Trump benefitting "record high in stock market". The problems with budget (due to costs of social give-aways to keep electorate) start showing up. There is not much upside left in (another) construction boom we had recently. 6. PLN trades as semi EM, semi DM. We have good capital markets, very liquid currency market, good democracy (recently undermined as mentioned above) and EU plus NATO membership that makes us as if we were one foot in the door in DM camp. 7. EURPLN vs USDPLN: The only pair that matters locally is EURPLN. No one cares about USD here. It is as simple as that. and unlike the other parts of the world where it is USD crosses that matter and EUR crosses are reflection of that and EURUSD rate. In Poland it is EURPLN that has any meaning and USDPLN is just simple EURPLN/EURUSD 8. Therefore, if you are bearish EUR, short EURUSD (not EURPLN !!!). If you are bullish USD then go long USDPLN if you would like to have such exposure through local market. 9. EURPLN is a good candidate to short in 4.40 region with a very wide stop well above 4.50s as much as 4:60. Weak short hands are routinely shaken out with quick moves to 4.45, 4.50 and spikes above on very bearish (short lived) sentiment. 10. Very high levels of EURPLN are used by NBP (Polish CB) to dump reserves (do not confuse with interventions) and they are making very handsome yearly profit doing that. Likewise, they will let foreign currency reserves accumulate the lower we get 4.10 and below to 4.00 to keep EURPLN high enough to help out our exporters. Anything in between 4.10-4.40 I'd say they will let the market "chop" all it wants. 11. Disregarding your entry level idea and reasoning (and the fact that publication date is a bit late), Technically your trade idea is flawed in my opinion. Your SL level is just unrealistic. A small daily blip will take you out of this trade. Your TP also make little sense. 4.20 is an important floor so either cash in well above that (i.e 4.22/4) or let it ride till 4.15 or even 4.10 12. Even if you enter at 4.40 and double down at 4.50, with wide stops and potential for 4.20/4.10 this trade only manages 1-2x amount risk with I'd say 50% or slightly better chances of working out. Not bad but nothing spectacular either. 13. 3-month horizon for the trade in EURPLN is enough time to see EURPLN spike "fade" work out. The problem is the timing though. Besides internal problems (Constitutional/Judicial issues) look at the world markets that may reverse anytime soon. Another factor to consider is the summer doll-drums. Come September/October, If you see VIX going up, PLN will start trading like other EMs (usually weaken) even though it is not to be confused under any circumstances with the likes of TRY or ZAR. 14. Finally, last few calendar days of the year (after Xmass), Polish CB is often dumping some currency reserves through BGK to close out the fiscal year. Therefore any decent swing play should keep that date in mind as a way to extend the downside move. 15. If my points are not clear enough, let me rephrase: expressing short EUR ideas is not to be done through EURPLN, unless you see some panic spikes to high levels which almost always are short lived (barred worldwide crisis) and good probability to make money only IF you have deep enough pockets and nerves to withstand any remaining upside. EURPLN makes for an excellent range play but trade parameters and timing are paramount (like in every trade) my $0.02 worth
    • GO
      Greg O.
      10 August 2018 @ 11:33
      I have posted above with spaces and paragraphs, but for the reasons unknown it shows up the way it does. Not my fault
    • RL
      Radu L.
      10 August 2018 @ 12:38
      very good explanation of what is actually going on on the ground
    • zy
      zhang y.
      10 August 2018 @ 14:09
      This analysis is much more detailed than him, well done
    • CT
      Christopher T.
      11 August 2018 @ 03:41
      Sounds like youre anti the PiS party
    • SH
      Steve H.
      11 August 2018 @ 12:17
      I don't follow Poland very closely, but I had thought the current government's 'attack' on the judiciary is no more than an attempt to overturn the stuffing of their own people into judicial posts by the previous government. Perhaps I'm wrong. Aside from that minor quibble, this was an excellent and well-argued comment which underlines the importance of having detailed local knowledge before getting involved in exotics. Great insights.
    • CT
      Christopher T.
      11 August 2018 @ 23:08
      Thats correct Steve Re: previous admins attempt to filibuster.
    • EF
      Eric F.
      12 August 2018 @ 13:33
      Thanks Greg, great insight. I can’t knock Joseph as impossible to have this detailed level of local knowledge but so useful to get it from you. It looks like your points have already proven out re SL already. I for one really welcome input like this and at risk of repeating myself, wish there was a more formal forum to get such fantastic insight & knowledge like this.
    • CS
      Christopher S.
      13 August 2018 @ 10:16
      It would be great to hear your opinion on Polish equities. I find them quite attractive at current levels - for a long term buy and hold.
  • DF
    Daniel F.
    10 August 2018 @ 10:16
    Stop loss has already been reached. Pretty bullish run from the date of recording to the 10 August. Price moved up and aptly touched the resistance for the daily bearish trendline. Should resume its course back down. Probably better to set your SL between 4.31 and 4.32 depending on your risk appetite. These are round numbers of the support and resistance levels in the consolidation zone on the H4

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