Polish Zloty (EUR/PLN) – Zloty depreciates on weak macro data

The published macro data from the economy keeps confirming the first part of 2013 will be hard for the Polish economy. CPI inflation declined in December to 2.4% (yearly basis) while Core CPI dropped to 1.4% (from 1.7%). I do not expect a sudden increase of inflation and I hope the local MPC will take that into account. We had to wait till the end of the week though to see more action on the Zloty market, which traded within the 4.10 – 4.13 range throughout the rest of the week. That is when the industrial production report came out and showed a 10.6% decrease in December. The EUR/PLN shoot up and hit 4.16, its highest level since November of last year. It appears the Zloty will lose some of its appeal in the upcoming weeks and it will be hard to observe levels lower than 4.10. After some consolidation, the EUR/PLN broke through the crucial resistance of 4.13. If the sellout of the Zloty will continue, the market should reach the 2012 November highs of 4.19. The current daily candle seems to be breaking the 200 MA, which confirms the upward movement scenario. The hope for PLN bulls lies in chance of the EUR/PLN declining back to the downward trend channel that it was before. In that case, the market will target 4.12. Much more we will know after the daily candle closing.


Pic.1 EUR/PLN D1 Chart

Hungarian Forint (EUR/HUF) – Week of correction

While in most CE currencies the New Year brought a new wave of weakening in spite of the strong euro support this week was rather positive for the Hungarian forint which is also the most volatile in the region. Many investors believe that emerging markets will be the hit for 2013 on financial markets as investors continuously will leave low returns in exchange of some extra profit. This perception was well utilized as the Hungary’s Government Debt Management Agency announced on Monday it hired top investments banks arrange a series of fixed-income investor meetings in Europe and in the U.S. in the coming weeks. As a reminder Hungary will need to collect 4-4,5 billion euros from bond investors in order to finance maturing debt in 2013. The success of the auctions is key for the forint market and for the treasury equally as the country will strive to get out of the EU’s record long lasting excessive deficit procedure. A big support arrived for the forint from ex finance minister Mihaly Varga who in contrary to the current Economy Minister stated in the national radio that the EUR/HUF currency’s exchange rate should be stable at 275 to 285 level, and that weaker rate hurts indebted families. Strong long trend support is visible on the H4 chart’s upward trendline that has pushed back several times the corrective attempts. Thursday was the fourth occasion of the bounce hence the new support level is the round 291 level. The target of long positions depends on the timeframe but the 295,50 level seems to be a comfortable target as it is the meeting point of a 61,8% fib level and a local high.

Pic.2 EUR/HUF D1 Chart

Romanian Leu (EUR/RON) – Going up the emerging ladder

This week the Euro has found it too difficult to resist the Leu advance. The best “RON” time was on Monday when JPMorgan decided to join (a previous move by) Barclays in announcing a possible inclusion of Romania’s Treasury notes into a global emerging index. Putting Romania on the map of dynamic, flexilble, hungry for yields capital has been seen as an opportunity to position ahead of the actual move, slated to begin on 1st of March and increase gradually until May. As the local market is small compared to its regional, more visible peers, the effects are only stronger. That being told, Romania is still far from booming. Harsh austerity, of the kind some Eurozone countries need to digest, is most likeley not necessary, but it is early to celebrate, and Europe’s recession slows the economy. The World Bank revised its growth forecast for Romania downwards to 1.6%, which may still be optimistic, but at least would mark a noticeable advance from the kind of muddling that happened last year. The National Bank may have also stepped in to stem excessive volatility, changing from RON-guardian to Euro-helper. Tme for consolidation may lie ahead, as the markets try to find where are the price levels that can actually be sustained. As technical analysis suggests, never underestimate the power of the trend. And one support after the other gave way to the impetuous sellers. Strong (we believe) support is at previous multi-year highs at 4.3000, before the 4.2843, 61.8% retracement of the summer 2011 – 2012 rise. In case this gets crushed, one would have to look deeper, around 4.23 to find a reference of some interest. Yet we believe there may be time for at least a pause, even more so if 4.3000 is “caressed”. First resistance is 4.3470, with a medium relevance. The channel is still safely limiting the price as long as we stay below 4.36. Further support stands at 4.4000, easily reachable if 4.36 is crossed.

Pic.3 EUR/RON D1 Chart