PLN, HUF and RON: markets calmed down…

Polish Zloty (EUR/PLN) – trading in a range

It has been a slow week on the Zloty market. The Greek problem is close to being solved and the market is waiting for stronger impulses. Those has not come from the macro calendar although the news were positive – unemployment in June declined to 10.3% from the previous 10.8%. More attention though is being paid to the possible help the government is planning for Swiss Franc mortgage holders. According to the ruling party (Civil Platform) project, banks will re-calculate the mortgage of the client as it was taken in Polish Zlotys (instead of Swiss Francs) and will cover half of the difference. The other half will be covered by the client in the form of a cheap loan (at 1.5%, the current reference rate). Not all mortgage holders will be able to take advantage of the proposal – the project excluded people who own more than one piece of real estate, the LTV ratio needs to be at least 120% (it will decline in the following years) and the apartment to which the mortgage applies cannot be bigger than 75 square meters (if it is a house – 100 square meters). This last rule will not apply to families with at least 3 children. Well, this is a way of helping many people but many others are against. The total cost is expected to range between 9 and 9.5 bln Zlotys (around 2.3 bln EUR). For sure this could create a precedent and in the future the government will be expected to help clients who got in trouble due to investments in other financial instruments. Even if this project is introduced, it should not affect much the PLN.

After a sharp decline in the past weeks, the EUR/PLN calmed down and traded within a narrow 4.10 – 4.13 range this past week. We see that those levels correspond to 50% and 38.2% retracements levels of the last upward movement. Breaking them should trigger larger moves. If the support of 4.10 is broken, the market should attack 4.07. On the other hand, breaking the 4.13 resistance, should trigger a EUR/PLN move towards 4.17.

Pic.1 EUR/PLN D1 source: xStation

Hungarian Forint (EUR/HUF) – NBH stops rate cuts

The National Bank of Hungary cut interest rate by 15 basis points on Tuesday and NBH Governor György Matolcsy told a subsequent news conference that rates would remain at this level for a long period of time. Governor Matolcsy also confirmed that the National Bank’s managing director, Marton Nagy, will take over as deputy governor on the MPC replacing Adam Balog. After the conference, the Forint reached new local highs against the Euro and welcomed the stopping of the easing cycle. Furthermore, Hungary’s Government Debt Management Agency (ÁKK) has recorded significant demand for 3-year, 5-yr and 10-yr bonds it has put up for auction on Thursday. For example, the 5-yr bond was the most popular this time, and the HUF 15 bln lot attracted HUF 87.8 bn worth of bids, of which the maximum allowed volume of HUF 22.5 bln was accepted. The average yield came in at 2.63%, down from 2.79% at the 9 July tender. Only the US dollar appreciation held back the Hungarian currency from 306-305 levels in the past 2 days.

On the daily chart we can see how important levels are the Fibonacci retracements and the moving averages. The 50% Fibo and the 200 DEMA turned back EUR/HUF from a new downturn on Wednesday. Probably, the 308 level (200 DEMA) will be the most difficult resistance for Forint bulls in the near future. Under 308, pressure on Euro could increase but for next week we expect that the US dollar strength will keep the EUR/HUF above the 308- 309 levels.

Pic.2 EUR/HUF D1 source: Metatrader

Romanian Leu (EUR/RON) – Fiscal limbo? No.. it’s summertime

Once Greece is less of a worry, the uncertainty surrounding the new fiscal setup, including a cut in VAT that some view as dangerously prociclical created short-term worries. The President refused to sign the package that includes other fiscal stimulus such as public wage rise into law, and that was enough for traders seeking a vacation: summer is at its full in Bucharest, and the range 4.40 to 4.43 seems decent. Macro data has been relatively scare, but following recent retail numbers and previous Q1 data, market estimation of growth in GDP for 2015 was revised upwards to as high as 4.6% in one of top bank’s view. As the Fed draws closer to rising rates and risk sentiment readjusts, a move upwards may be interesting to watch, pushing the range towards 4.43 – 4.45 next week.

Technical perspective offers a continuation of the range, with a strong 4.4000 support followed by 4.3823 while initial resistance is at 4.4315. An engulfing bullsih on Friday may be (with some understanding) the reason for a push closer to 4.4315 in the short run. More resstance at 4.4450 and 4.4525.