EUR/CZK had its biggest one-day decline in over five years after the Czech Central Bank decided at its Extraordinary monetary policy meeting decided to scrap its currency cap. The central bank also kept all key interest unchanged, they left the Repurchase Rate unchanged at 0.05%, Discount Rate at 0.05% and the Lombard Rate at 0.25%.
Recent hotter than expected Czech CPI saw the February year over year reading at 2.5%, the third straight month with annual reading above the central bank target and highest level since the end of 2012. The FX Floor policy regime was introduced back in November 2013 to help inflation recover. The longstanding cap was set at 'around the 27 level.
The EUR/CZK 30-minute charts shows the subdued move from the removal of the floor saw the koruna strengthen to 26.542. Price has since stabilized and trades steady around the 26.605 level. Initial resistance remains the 26.780 to 26.970 region. The medium-term range for this currency pair could be the 25.000 to 27.500 zone.
The trade: Sell EUR/CZK at 26.800 with a stop loss at 26.883 and a take profit at 26.550. The Risk/Reward Ratio is almost 1:3.