PLN, HUF and RON: PLN moving, HUF waiting and RON relaxing

Polish Zloty (EUR/PLN) – 4.34 in sight

After reaching its local lows of 4.23, the EUR/PLN has been rebounding for the last two weeks. Volatility has increased on the Zloty market. No wonder, lots of things happening on global financial markets. This past week was no different as we were all waiting for the ECB press conference. Mario Draghi, as usual, made markets move. Actually, he said nothing new or revolutionary: interest rates will remain low for an extended period of time, also after the QE program ends. The QE program itself will last till March of 2017 or till inflation stabilizes (that is when the EUR/USD collapsed on Thursday). Draghi also warned that risk factors and the global situation is still not good but at the same time he stated that the condition of the Eurozone has improved in the last month. Mixed signals meant the EUR/USD jumping back and forth. As usual, it was mentioned the ECB is ready to act with full power if the situation worsens. Super Mario’s press conference had its effect on the PLN, although the Zloty’s signal was more clear. This past week we also got some interesting news from the local economy. Not so good news. Average wages in March increased only by 3.3% (yearly basis, lower than expectation) while industrial production expanded by a mere 0.5% (also yearly basis, also lower than forecasts). Deflation remains the main issue as the PPI in March stood at -1.7% (lower than the previous month, worse reading than expected. Summing up: both the Eurozone and the Polish economy are still struggling. Effect? The Zloty kept losing throughout the week. By the end of the week the depreciation has accelerated mainly due to fears that Moody’s will cut Poland’s rating and the dovish statements made by MPC members revealed in the MPC minutes publication (it seems most of them are in favor of cutting interest rates).
On the daily chart we see that after breaking from the downward trend, the EUR/PLN tried to decline but it rebounded. It did so in a strong fashion breaking the 4.34 resistance (38.2% retracement level of the last downward move) and reaching its monthly high of 4.35. The stochastic oscillator is signaling the market is overbought (but it is not a strong signal yet) so there is a high probability the EUR/PLN will bounce back. In this case, the first target should be 4.32. If the market continues its way up, the next targets are 4.37 and 4.40.


Pic.1 EUR/PLN D1 source: xStation

 

Hungarian Forint (EUR/HUF) – Forint gets ready for the next rate decision

The National Bank of Hungary still has room to ease policy further to help the government achieve their targets. Analysts are expecting two more rate cuts from the Monetary Policy Council: the first one could be next Tuesday and one more in May. Probably, Hungary's interest rate (1.20%) will sink below 1% during the next couple of months. The Hungarian currency is still moving in a trap set by the NBH's steps. Furthermore, the central bank may have a special tool to keep Forint in line. Viktor Zsiday of the Citadella Derivative Fund in Budapest, gave an interview to Bloomberg on Friday where he said: "Reaching the zero rate this year will only be enough to keep the Forint in the 300-315 per euro range". Zsiday also stated that National Bank of Hungary may be only months away from introducing a cap on the Forint, similar to the one imposed in the Czech Republic. Anyway, the NBH is still saying that they have no exchange-rate target.

From the technical point of view, the Forint is currently trading at 309.83 against the euro on the interbank market today, weakening from 309.54 late on Thursday. The EUR/HUF has been trending higher and moving closer to the trendline on its 4-hour time frame. However, the price is currently testing the resistance around the 310 major psychological level. After a break out above the 310 line, the Hungarian currency could be in a trouble again.




Pic.2 EUR/HUF D1 source: Metatrader
 

Romanian Leu (EUR/RON) – Some short-term relaxation

The very controversial law affecting the relationship between debtors and creditors in the real-estate arena has passed Parliament, and would become law if not contested at the Constitutional Court. Banks have already demanded the President take such step. The current form, which leaves aside the government support program for first-time borrowers and sets a limit on the value of real-estate the troubled borrower can place back into the banks loving arms, would probably be tolerable for banks, if a retrospective flavor would not raise the hair on the backs of rational observers. Macro data does not look bad: a 5.1% increase in construction activity in Feb vs. Jan, seasonally adjusted, and employment rate growth of 0.4 percentage points in 2015 from the previous year. Retail has jumped by 2.4% m/m in Feb which would be quite fascinating if the trend would be sustainable. We see some risks down the road, but now, before the elections, consumers may feel good. The road vehicle density indicator suggests that good times are back: it is almost as crowded in the streets of Bucharest as before the crisis. The local currency possibly has some good time ahead, short-term, but the longer-run perspective might be different.
In the technical perspective we have seen a (slow motion) breakout from the symmetrical triangle only to see the price pushed back, in an effort to design an upward-sloping triangle. We do not put our full faith into it, but it seems that a re-test would be the preferred path, after some short-term bearishness towards the first trendline (around 4.46) provided that a southern breakout does not occur (that would bring into the market’s attention support at 4.4550 and 4.4450). On the upside, given enough time, we may see the market test 4.4850, with a breakout possible in a medium-term (a few weeks) horizon.



Pic.3 EUR/RON D1 source: xStation