After a major downtrend, we have seen some USD strength and now we have sideways price action and expect an upside breakout. We view the risk to reward on this trade as attractive...

In the recent broad-based sell off the USD, the high BETA emerging market currencies saw significant upside, and last week we looked at both USD/CZK and USD/SEK You can check the articles here

Longer term we are bearish on the euro and eurozone which will weigh on the PLN. As a “wildcard,” we also have Ukraine - Russia conflict escalating and the possibility that Poland could be drawn into the conflict.

The market sold the USD off on the view that the Fed could cut rates by 50 bps this month and could cut more than 100 bps this year which is too optimistic in our view.

We expect the USD to rally back to the upside and the trade below has low risk and high reward potential.

Technical Analysis

The key levels of support and resistance to look out for are below. On a breakout we would be looking for strong follow-through buying – if we don't we would simply scratch the trade and go flat.