Forex Trading Strategies & Tips for USD/PLN Exchange Rates

Instrument description

The Forex quote that represents the U.S Dollar in relation to the Polish Zloty is given by USD/PLN, where USD is the base currency, and PLN is the quote or counter currency. The USD/PLN pair shows the combination of two different currencies, as the USD is the leading global currency, while the Zloty represents a growing Polish economy.

The USD/PLN is considered a minor pair in the Forex market due to small trading volume. The vast difference in the monetary policies of the U.S and Poland means that it is difficult to predict the price movement of USD/PLN pair. There is often a high risk involved when trading the USD/PLN, and only experienced investors can effectively use this pair to diversify their portfolio.

The USD/PLN pair shows how many Polish Zloty will be required to buy one U.S Dollar. For example, if the current exchange rate of USD/PLN is 3.94, it shows 1 USD equals 3.94 PLN; in other words, a trader needs to pay 3.94 Zloty to buy 1 U.S Dollar. The USD/PLN pair is considered an exotic pair with low spreads and only attracts the attention of traders and investors in the Polish Forex market.

History of USD/PLN Currency Pair

In the USD/PLN pair, the dominance has always been of the USD as the United States is the largest global economy and a more developed country as compared to Poland. The USD/PLN pair has all the properties of an exotic pair, such as low spreads, high volatility, weak liquidity, and unpredictability. The focus of the U.S economy is on services, and trade with other global countries.

The Zloty is the official currency of Poland and dates back to the Middle Ages. The word Zloty means golden, and the first gold coins launched in Poland were called Zloty. Poland is an active member of the European Union (E.U.), but it has still kept Zloty as its official currency and not the Euro. The main problems that the Polish economy face are economic instability and budget deficit.

The first priority regarding the economy of Poland is given to international trade and services, and then other sectors are given importance, which includes mining, shipbuilding, processing industry, and agriculture. Apart from the U.S, Poland has strong trade relations with Germany, Russia, and the U.K. The Polish Zloty, share similar properties and behavior with other currencies such as Russian Ruble and South African Rand.

When we look at the trade balance between U.S and Poland, statistics show that Poland imports around 0.25% of total U.S exports while the U.S imports almost 2.5% of Poland’s total exports. The main exports of the U.S include vehicles and machines, while exports of Poland comprise of civilian aircraft parts, boilers, electronic equipment, plastics, and petroleum gases. The Polish Zloty is considered a weak currency when compared with other global currencies, as Poland does not have abundant resources of oil and gas. But tourism and industrial goods have supported the Polish economy.

How to Trade USD/PLN Pair

The USD/PLN pair is a not widely traded currency pair, which is why it is difficult to predict the price movement, and only an experienced trader and investor can effectively use the USD/PLN and potentially gain profit from it. The USD/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. The Polish Zloty is not widely traded, and its activity is noticed only when the European markets open for trading. On Monday, the trading activity is quite slow, but it becomes active from Tuesday.

The volatile nature of the USD/PLN pair allows traders and investors to try to take advantage of and have the possibility to potentially profit in a short space of time. Among other ways to trade USD/PLN pair a popular option is Contract for Difference (CFDs) which that allows traders to speculate on the value of the underlying asset without having to buy or own the currency. A trader has the option of using leverage that may increase the chance of maximizing profits. But there are also equal chances of considerable losses if the prediction goes wrong, so traders may consider to try to manage risk and apply stop loss.

With CFDs, a position can be traded in both directions, which means going Long and Short. If you think that the USD would increase in value in the near future against PLN, then you would go Long or Buy, and if you believe that USD would lose value against the PLN, then you would go Short or Sell.

How to read the Price Change in USD/PLN Pair

Due to high volatility, the analysis of the USD/PLN pair becomes complexed, but the traders may use support-resistance levels and slow Stochastics to determine the entry and exit points. 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 USD/PLN pair reached the highest value of 4.298 on March 23, 2020, and since then the market had not dropped points significantly until recently when the USD/PLN pair reached the lowest value of 3.898 on June 15, 2020, and currently, USD/PLN pair trades on 3.950. The Bid price is 3.9521, while the Asked price is 3.9479

If the USD/PLN rate increases, it means that the U.S Dollar has gained in value as compared to Zloty, and similarly, if the USD/PLN declines, it shows that the U.S Dollar has depreciated against Zloty. If we consider the last five years, then the USD/PLN reached an all-time high of 4.279 in December 2016 and an all-time low of 3.3076 in January 2018.

What causes price change in USD/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 USD/PLN should 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 USD/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 USD/PLN by trying to accurately evaluate both the fundamental factors and using the technical analysis tools. The U.S Federal Bank, known as Fed and the National Bank of Poland (NBP), plays an essential part in planning monetary policies and releasing monthly reports. Both the central banks also manage the interest rates, inflation, Gross Domestic Product, and Consumer Price Index (CPI).

The economic data releases in the U.S must be monitored by the traders before trading the USD/PLN and includes the Non-farm Payrolls, interest rates, and unemployment rate. When performing fundamental analysis, the traders should keep a close eye on the political and economic news and developments in Europe. Apart from studying the macro-economic indicators, the traders and investors should also monitor other currency pairings such as EUR/USD, GBP/USD, and USD/JPY. The economic health of the European Union (E.U) plays a critical role in predicting both the short and long term trend of the USD/PLN pair.

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