Will USD/PLN sustain gains amid Poland's increased defense spending?

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US Dollar vs Zloty up 0.53% today

Highlights

Poland is increasing annual military and security spending to more than $50 billion, nearly 5% of GDP, shifting its fiscal policy stance.
Higher government outlays are set to impact Poland's deficit outlook and alter risk assessments for the zloty.
USD/PLN maintains a bullish technical trend with ongoing buying momentum and is expected to trade within zł3.9031 to zł3.9423 in the short term.

Zloty risk intensifies as Poland boosts military spending

Poland's decision to allocate close to 5% of its GDP, exceeding $50 billion annually, toward military modernization and national security initiatives has introduced a notable fiscal policy shift, according to Timesnownews. This increase in government expenditure is expected to influence deficit projections and risk assessments surrounding the Polish zloty. The trend underscores how fiscal dynamics are reshaping the economic environment for USD/PLN and could remain a key factor in investor sentiment.

Strong bullish momentum meets cautious signals amid overbought technicals

On the H1 chart, USD/PLN trades above the MA-20 at zł3.9035 and MA-50 at zł3.8914, while on the daily the price stands well above the MA-200 at zł3.7264. The Ichimoku Kijun at zł3.8931 provides immediate support. Momentum readings remain positive, with both MACD and ADX signaling ongoing buying interest. RSI sits at 71.28, and both Stoch RSI and CCI indicate overbought conditions. Bull/Bear Power stays positive, reflecting intraday buyer dominance, while the Awesome Oscillator is neutral and does not add momentum confirmation. These mixed technical readings warrant caution given simultaneous strong momentum and potential near-term exhaustion.

Upside bias persists as overbought risks call for vigilance

In the short term, USD/PLN is expected to consolidate within a projected range of zł3.9031 to zł3.9423 over the next 2–3 days. The probability of continued upside remains high, but overbought readings suggest risk of a corrective pullback if buyers lose momentum. A breakout above resistance could open the path to fresh local highs, while a drop below support would indicate potential for a mild retracement as overbought pressures ease.

Anton Kharitonov, expert at Traders Union, sees the upside in USD/PLN as structurally supported by Poland’s elevated government spending and firm intraday technicals. He believes the current overbought readings and mixed momentum indicators require tactical caution for new longs. Base case is for consolidation with risk of a pullback unless resistance breaks. "Until zł3.9423 is decisively cleared, I see limited reward for aggressive buying here given short-term exhaustion signals."

Earlier, analysts noted that the USD/PLN maintained a bullish outlook, supported by sustained momentum and favorable positioning above key moving averages. The latest developments introduce fiscal policy shifts as a new factor for the pair, with attention now turning to how Poland's increased government spending could affect risk appetite and direction for USD/PLN in the near term.

Source of Data: USD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

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