PLN, HUF and RON: waiting for the Fed

Polish Zloty (EUR/PLN) – 4.18 sustains the attack

IThe Zloty market remains boring for traders. Sure, finally the EUR/PLN reached some crucial technical levels but without any abrupt moves. There was no local macro data being published so we focused mainly on external events. The main ones included Janet Yellen’s (Fed’s Chairman) stating the Fed could rise interest rates this year (October?) if macro data confirms the economy is in good shape. Volkswagen – wow. Big time mess with the engines issue. No wonder the company as well as the Dax headed south this past week. On the local market not much was going on. Still there are discussions about the government aid to CHF-denominated mortgage holders as well as the talks regarding the newly appointed President’s proposed changes (decreasing retirement age to mention one of the main topics…). An interesting report has been published by Goldman Sachs. According to the investment bank, the Polish Zloty is among the 4 currencies (along with the Czech Crown, Mexican Peso and Indian Rupee) that would gain in value if the Fed decides to hike interest rates. All the mentioned economies have strong fundamentals and should not be affected so much by the Chinese economic slowdown. Actually, an appreciation of the PLN can already realize in the upcoming week. 

As we see on the daily chart, the EUR/PLN reached the 4.18 support (50% retracement level of the last upward move) at the beginning of the week but it was unsuccessful in breaking it. The market rebounded reaching 4.23. Currently, it is being traded around 4.22 and there are high chances it will decline. The stochastic oscillator is reaching the 80 level suggesting the market is becoming overbought. A downward move should take the EUR/PLN back to 4.18. If this support is broken, the next target will be 4.16. Breaking the resistance of 4.23 would trigger an upward move towards 4.26.



Pic.1 EUR/PLN D1 source: xStation

Hungarian Forint (EUR/HUF) – Staying high

As many analysts expected, the National Bank of Hungary (MNB) has kept interest rates unchanged this past week at 1.35%. On the other hand, the MPC did some changes: the 2w (two-week) deposit instrument (MPC rate) will be changed to a 3m (three month) term with quantity restrictions on NBH access and the 2w especially through a new auction process. NBH may also announce details about long-run swaps for banks to encourage funding. The key aim is to increase bond demand and lower government funding costs for MNB. Dovish statements signal happiness with recent HUF weakness. Actually, growth is gradually decelerating, while downside inflation risks are rising what means monetary policy must remain loose. That would hold the Hungarian currency in the weakest territory.

The EUR/HUF is still moving in the 308 – 315 range. Furthermore, we can see that the 316 level is the most important resistance now. The HUF could be in a huge trouble soon because EUR bulls are trying to conquer this gate for the 4th time. 320 would be the next stop if the 316 resistance falls..



Pic.2 EUR/HUF D1 source: Metatrader

Romanian Leu (EUR/RON) – Temporary help for the Leu

Funding pressures in the banking system have pushed overnight borrowing costs by more than 1 p.p. this week, providing the RON fans with a reason to get into the market. It may have to do with budget payment deadlines focused around this time of the month, and therefore temporary in nature. On the macro side, employment data provided good news, with employment to working age population ratio rising to 62%. Wages have increased by 7.5% on average in 2014 vs. 2013. Poitical uncertainties tend to remain as the PM is facing a trial and opposition leaders call for his resignation, but the market has been supported by the ” picking pennies in front of the steamroller” mindset, where the returns of the Romanian fixed income still appear juicy in a (large developed markets) zero-rate environment. 

From a technical point of view, the market is getting more and more attracted to the 4.4000 support (with a spike downwards looking like an attention test for the CB on Friday), while the trend channel has morphed into some other, slightly rising pattern. Should we put much of our confidence in the new formation?



Pic.3 EUR/RON D1 source: xStation