Eventful week but markets remain stable

Polish Zloty (EUR/PLN) – Unable to break the 4.08 resistance

The Uk elections and the NFP report were in the spotlight for global investors. Interesting things were also happening in the CEE region. The main topic on the Polish market are the upcoming presidential elections this Sunday. It seems the current President, Bronislaw Komorowski, will remain on his position. His main rival, Andrzej Duda (from the righ-wing party Law and Justice) is trailing by around 10%-15%. Despite the importance of the elections for the country, financial markets should not be affected. None of the candidates has presented any revolutionary ideas that could cause investors’ anxiety. Basically, nothing will change. From the financial markets standpoint, much more important was the MPC’s monetary policy meeting. The central bank kept interest rates unchanged at its lowest level in history – 1.5%. Despite experiencing deflation of 1.5%, the MPC strongly stated it does not plan to cut interest rates any lower. Why? The argument is the relatively strong GDP growth, which in 2015 is expected to be 3.8% (it was 3.4% in 2014). The manufacturing PMI index stands at 54 points and remains stable. The unemployment rate declined to 11.7% so the numbers look good. A market factor that is also affecting the PLN is falling government bond yields. 10Y bonds currently yield just above 2.8% and due to this, the government canceled its Thursday bond auction (worth 3-5 billion PLN). 

Throughout this past week the EUR/PLN traded in a rather narrow 4.03 – 4.07 range. Towards the end of the week it advanced and testes the 4.08 resistance, unsuccessfully. This is the second week in a row when the market tries to break it. If it happens, The EUR/PLN could fly to the next target – 4.13. If another attack is turned around by PLN bulls, we should see the market targeting 4.03. Breaking this support should trigger a move south towards the crucial 4.00 level.



Pic.1 EUR/PLN W1 source: xStation

Hungarian Forint (EUR/HUF) – Sliding back

In Hungary the main topic remain interest rates and factors causing it, mainly inflation. The National Bank of Hungary’s (MNB) underlying inflation indicators has risen as the headline inflation ticked up to -0.3% in April (yearly basis ) from -0.6% in March 2015. The rise in consumer price inflation in the previous month was mainly reflected in increases in the price indices for both - market services, due to the dropping out of last year’s decline in financial services prices, and to unprocessed food. Of course, the negative inflation measure cannot help the Forint as the Greek problem is still unsolved. Otherwise, next week’s gross domestic product data could support a short pullback from the 2 months highs of the EUR/HUF.

From the technical perspective, the EUR/HUF touched the 38.2% Fibonacci level yesterday and this line could be a massive resistance in the future (just above 307). It is possible though that the Hungarian currency will regain some ground next week. Not only the the 38.2% Fibo level could stop it but also the 100 DSMA at the 304 level. In this case, the EUR/HUF could be targeting the 300 support.



Pic.2 EUR/HUF D1 source: Metatrader