Waiting for the big move

Polish Zloty (EUR/PLN) – Still unsure of the direction

After a volatile January, this month is much calmer. The EUR/PLN has been trading in a 4.16 – 4.20 range without giving any signals of more abrupt moves. Globally, lots of things are going on and could be the determinants of major spikes. Still, the PLN seems pretty stable. Actually, it has been recognized by marketwatch.com authors as a possible investment for 2015, with high potential rates of return. What also has helped the Zloty this past week were Marek Belka’s (MPC’s Governor) words, who stated that the national currency is currently undervalued (I do not know about that…). At the same time he noted that external and internal factors may force the central bank to accommodate monetary policy. Does that mean an interest rate cut? Hopefully. The recent macro data leaves no excuses. Although average wages increased in January by 3.6% (yearly basis), other indicators confirm the economy is struggling. Industrial production in January grew by 1.7% (yearly basis, lower than expectations) while PPI stood at -2.9%. An increase in retail sales by 3.3% does not save the situation. I believe this does not leave a choice to the MPC and an interest rate cut in March is a must. The question is by how much: 25bp or 50bp. The first choice is rather discounted already by the market; the second one could increase volatility on the PLN market. 

What do we see on the daily chart? Not much to be honest. The EUR/PLN tried one more time to attack 4.20, but unable to force it, retreated to the 4.17 area. It seems the market has not decided which direction to go. The stochastic oscillator is not giving us any hints either. What we can say is that an upward move would mean testing the resistance of 4.21. If broken, the next target for the EUR/PLN will be 4.24. A more probable scenario is a test of the 4.15 support. Breaking it would mean a decline towards 4.13.

Pic.1 EUR/PLN D1 source: xStation

Hungarian Forint (EUR/HUF) – Vladimir Putin visitation

Following the German Chancellor, Angela Merkel, Russian President, Vladimir Putin came to see Budapest and had a joint press conference with Hungarian Prime Minister Viktor Orban. Although the meeting was to be top secret, we have heard some important news what could impact the local stock market. First of all, Vladimir Vladimirovich mentioned Richter and MOL (Hungarian companies), saying Moscow would support their operation in Russia. Secondly, Viktor Orban sealed a gas deal with Putin. Russia will place at Hungary's disposal the unused portion of gas contrated in 1996. Government will pay dor the gas only upon its usage. Viktor Orban said the visit was more pleasant than the Merkel meeting was and his upcoming meeting in Poland (with Prime Minister, Ewa Kopacz) will be. Anyways, the local currency is still getting stronger in the past few weeks. The Forint appreciated almost 11% against the Swiss franc and 3.4% against the Euro. We all know a stronger Forint depends on Friday’s Eurogroup meeting and on the Greek bailout package. Furthermore, the MPC’s interest rate decision is coming up next Tuesday.

From the technical perspective, we can see the 100 WEMA at the 304 level is the biggest barrier for the Forint bulls. It is probable the EUR/HUF will visit lower levels but we believe it will find a good support to get some rest. We are waiting for a solution of the Greek problem and National Bank of Hungary's decision. If the news are positive, levels below the 300 level can be expected.

Pic.2 EUR/HUF W1 source: Metatrader

Romanian Leu (EUR/RON) – Time for Greece to speak up

Value has been found by the market in the 4.43 - 4.45 area, as the lateral move scenario we described unfolded accordingly. Watching events in Greece may be relevant for RON as there is a number of Greek banks that amount to a relevant size of the local banking market share. The psychological channel may be more important in this case, since the local subsidiaries are generally well capitalized. However the local economy is on an uptrend, and proposed fiscal stimulation measures starting in 2016 could also brighten the mood. Given the uncertainty in Greece and Ukraine, we see however a rather balanced approach, possibly a bit more volatile than the previous week, with a breach below 4.43 only on the wave of a deal between Athens and Europe, while lack of agreement may easily boost the market above 4.46.

Technical analysis perspective now points to a drift area, as the buyers were lacking strength to close above 4.4525. There is even a bit of downside room towards 4.4315 in the near term. While support is more relevant at 4.4200 and 4.4000, we view the oscillations around the previous lower line of the channel (on a slight upward path around 4.4350) as the most likely outcome. Resistance now is at 4.4525 and 4.4750.

Pic.3 EUR/RON W1 source: xStation