Polish Zloty (EUR/PLN) – Further easing could come
Although during the past few days the downward correction in oil pushed Brent crude back below $40/barrel and European equities followed their Asian colleagues lower, with main indices losing more than 1%, the Złoty remained stable. It only continues the tradition. Despite new members of the Polish MPC, Mrs. Gatnar, Hardt and Zubelewicz, having suggested reluctance to vote for further rate cuts in Poland, the market still sees room for a cut in the next 6 months, with 3 in 4 chances for such a move. Yet the zloty has significantly strengthened over the past few weeks, allowing for more room for the dovish MPC members. March inflation data is in focus next week. Consumer prices in Poland have dropped 0.8 percent year-on-year this February, a slower pace than the 0.9% fall in the previous month while hitting its 20th consecutive month of decline. According to the expectations CPI will be negative for March as well, and that may create some bullish EURPLN appetite in the week ahead.
From a technical perspective the market rebounded slightly and is currently fighting at the 4.25 level, which was the main support level this week. Actually the EURPLN is at daily Fibonacci support around the 4.24-4.25 levels. Our main target and trend is bearish unless the markets move above the local resistance that is found at the 200 daily EMA (4.29). This will be the watching area: if we see a closing above this level, the following day the trend could change.

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Hungarian Forint (EUR/HUF) – The decision has been made
The National Bank of Hungary (MNB) surprised markets on Tuesday by cutting the benchmark rate by 15 basis points to 1.20% from 1.35%. The weak inflation outlook and prospects for slower growth are quoted as reasons for Hungary’s easing cycle, which resumed this week. Furthermore Marton Nagy, deputy governor at National Bank of Hungary, said in an interview that monetary authorities do not have an exchange rate cap. He also suggested that a stable forint exchange rate is essential for proper monetary policy transmission, thus somewhat dismissing the allegations that NBH will not allow EURHUF to fall below 310. NBH cut its inflation forecast to 0.3% for 2016 in its March Inflation Report, a reduction from the 1.7% inflation data.

The forint was trading at 313.57 vs the Euro in today's interbank market, strengthening from 314.20 late on Thursday. As we see on the daily chart EURHUF broke up with the 309 area and touched two-month high (forint-low) at 314. Using the Fibonacci tool on the latest low and high swing (on the daily timeframe) shows that the 61.8% Fibonacci retracement level will be a bigger barrier for the Euro bulls. It seems EURHUF moved up again and could stay between 312 and 317 in the following days.

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Romanian Leu (EUR/RON) – Big week ahead
While Hungary’s cut taking some of its rates negative rippled through the region, Romania has remained largely stable. If, of course, we choose to look elsewhere and ignore the chatter about the banking law that would be discussed, finally, next week (one would hope so, at least). The current form would allow homeowners to walk away from their loan in exchange for the keys to the real estate collateral, but also raise doubt over the state guarantees over the program that kept the mortgage market alive in the post-crisis years, the “First Home” program. We expect the law to pass in a slightly toned down form. Some moderate volatility is in the pipeline, we believe. Thursday is also when the NBR decides on rates. No move expected, but will be interesting to see how the statement is framed, the National Bank having opposed the law quite aggressively.
In the technical perspective, not much action after breaking the short term uptrend. We have been in a consolidation pattern for the last 4 weeks, and there is no obvious reason why we should break support at 4.4450 soon.. Other than a big surprise by the NBR or the bank law next week. We think however a push back above 4.46 would make more sense, given that the longer term trendline is also getting near. Resistance stays at 4.4850 and then 4.5000, support is at 4.4450 and 4.4315.

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X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. None of the published information can be treated as a recommendation, disposition, promise, or guarantee that the investor will achieve a profit or will minimize risk using the information published on this website. Transactions including investment instruments, especially derivatives using leverage, are in its nature speculative and can provide both profits and losses that can exceed the initial deposit engaged by the investor.

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