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We expect the EUR to fall on the USD and this will impact Euro correlated currencies and we think the USD is a good risk to reward buy on the PLN and CZK.

Euro Correlated to Fall with the Euro

We expect eurozone to have a long and deep recession and the Eastern European currencies are vulnerable with their economies heavily reliant on exports. In addition, both Poland and the Czech Republic have been hit hard by the Russia – Ukraine conflict in terms of trade lost.

Both are also emerging markets and emerging markets tend to get hit hard in terms of a global economic slow-up which we have now. Also, in times of risk-off, they will fall against the safe haven USD.

We think the Russia-Ukraine conflict will get worse and we also think there is more turmoil in financial markets ahead. The euro will fall on the USD, but the PLN and CZK could fall more in our view.

USD Bullish Fundamentals

The USD has fallen on both currencies due to the view that the Fed will make a dovish pivot in terms of hiking rates but as we have pointed out in another article today this in our view won’t happen and also this view is discounted.

Technical Analysis

The setups are both similar in terms of we have fallen to major support and in the short term, we are at the outer Bollinger Band which is an indication of a short-term oversold condition. We expect the USD to firm up and move to major resistance levels indicated.

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