Forex Trading Strategies for EUR/PLN | Expert Analysis & Tips

Instrument description

The Forex exchange rate for the Euro against the Polish Zloty is given by EUR/PLN, where EUR is the base currency, and PLN is the quote currency. The Euro is probably the most recent currency as was launched in 1999 but quickly became one of the strongest currencies due to support from nearly every country in the European region. The Zloty is the traditional and official currency of Poland and dates back to the Middle Ages. The word Zloty is a plural of ‘zlote,’ and means golden, and Zloty was the name given to the first gold coins launched in Poland.

The relationship of the Euro with the Polish Zloty is called a cross pair. The EUR/PLN maybe a minor pair when it comes to market share and liquidity, but the pair is quite a popular option among both traders and investors who are looking for stability as compared to volatility of other major currency pairs. The EUR/PLN pair may also be seen as the ideal choice for traders who want to move beyond the conventional trading of major currency pairs.

The EUR/PLN pair indicates how many Polish Zloty will be required to buy one Euro. For example, if the current exchange rate of EUR/PLN is 4.44, it shows 1 Euro equals 4.44 Zloty; in other words, a trader would pay 4.44 Zloty to buy 1 Euro. The EUR/PLN pair is feasible for both novice traders and experienced investors who want to diversify and balance their portfolio.

History of EUR/PLN Currency Pair

Euro is the most traded currency in the world after the U.S Dollar. The Euro is the official currency of 19 countries out of 28 European countries that are all members of the European Union popularly known as E.U. But as U.K. has officially left the E.U in January 2020 following a public referendum in 2016, there are now 27 member states of E.U. The value of Euro is depended on the economic condition of member states and controlled by increasing or decreasing the interest rates.

Poland is considered an economically stable country with a focus on sectors such as industry, shipbuilding, and international trade. Poland has retained Zloty as its official currency and has not adopted the Euro as the national currency. Before the recession in 2008, the Zloty acted as an investment currency relative to the Euro and achieving quite a success when the credit boom was active from 2006 to 2007. But when the global debt crisis emerged, many of the western European investors pulled out money from Poland, and Zloty lost almost a third of its value to the Euro in 2010.

The Zloty is a decimal-based currency, which means that every single Zloty is comprised of 100 minor units. The Euro and Zloty enjoy a strong correlation as both the currencies originate from the European region. The trade balance between the Eurozone countries and Poland mostly includes the trade relationship between Germany and Poland that are also neighboring countries. Poland imports around 5% of the entire German exports while Germany imports almost 30% of Poland’s total exports.

The main components of Germany exports include heavy-duty machines, motor vehicles, chemicals, electronic products, and pharmaceuticals, while Poland’s exports include machines, electrical equipment, and metals. The Polish Zloty is considered a weak currency when compared with other major European currencies, and the reason is that Poland does not have oil, gas, or mineral deposits. But tourism and few industrial goods have strengthened the Polish Zloty.

How to Trade EUR/PLN Pair

The EUR/PLN pair is a not widely traded currency pair when it comes to volatility and trading activity, and the behavior of the EUR/PLN pair is similar to that of an ‘exotic pair.’ The EUR/PLN pair is traded 24/7 from Monday to Thursday, but the pair is actively traded during the European sessions and when the Polish market opens. On Monday, the trading activity is usually slow, but it picks up quite a pace on Tuesday.

The volatile nature of the EUR/PLN pair allows traders and investors to try to take advantage and have the possibility to potentially profit in a short space of time. Among other options to trade EUR/PLN pair a popular way is Contract for Difference (CFDs) which is a derivative financial tool which allows traders to speculate on the value of the underlying asset from the start to the end of the trade. As a trader, you have the option of using leverage which increases your chance of magnifying profits. But there are also equal chances of considerable losses if the prediction goes wrong, so you may want to try to manage your risk and apply stop loss.

With CFDs, you can also trade in both directions, which means going Long or Short when trading positions. If you think that the EUR would appreciate in the coming days against PLN, then you would go Long or Buy, and if you believe that EUR would depreciate against the PLN, then you would go Short or Sell.

How to read the Price Change in EUR/PLN Pair

The EUR/PLN pair sees significant fluctuations, and sometimes the price changes can even exceed 1000 points. The sudden unpredictability of the EUR/PLN pair is what attracts many short term traders. Many of the experienced traders know how to speculate and try to take advantage of the price differences. If we see the price charts, the EUR/PLN pair reached the highest value of 4.608 on March 23, 2020, and since then stable trends are noted, but the EUR/PLN pair reached the lowest value of 4.385 on June 2, 2020, and currently, EUR/PLN pair trades on 4.446. The Bid price or willingness of traders to buy is 4.4482, while the Asked price or traders willing to sell is 4.4444

If the EUR/PLN rate rises, it means that the Euro has increased in value as compared to Zloty, and conversely, if the EUR/PLN declines, it indicates that the Euro has depreciated against Zloty. If we consider last five years, then the EUR/PLN reached an all-time high of 4.48 in January 2016 and an all-time low of 4.02 in April 2015.

What causes price change in the EUR/PLN pair?

The Polish Zloty is affected by the current economic health of Poland and other macroeconomic factors. The value of both Euro and Zloty is influenced by the value of U.S Dollar. The investors who are looking to invest in the EUR/PLN are often advised to pay close attention to the economic news and factors concerning the U.S economy, such as inflation, interest rates, and employment rate. On the other hand, the traders looking for short term trading of EUR/PLN pairs are said to perform technical analysis and monitor rates of other currency pairs that include USD/PLN and EUR/USD.

Both the investors and traders can try to take advantage of EUR/PLN by accurately evaluating both the fundamental factors and using the technical analysis tools. The European Central Bank (ECB) and the National Bank of Poland (NBP) play a crucial role in devising monetary policies and release monthly reports. The central banks also play a part in managing the interest rates, inflation, Gross Domestic Product, and Consumer Price Index (CPI).

The ECB is located in Frankfurt, Germany and meets regularly on every first Thursday of every month except January to take decisions and devise financial policies. As 30% of Poland exports land in Germany, traders can easily examine the decisions taken by the Central Bank of Germany (CBG) and predict the price movement of Zloty.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.