EUR/HUF: Break below 348.65 to open the way towards the 345 level – SocGen

The forint has rallied for four straight weeks against the euro since the MNB last tightened in July. Looking ahead, economists at Société Générale expect the EUR/HUF pair to edge lower towards 345 and 340 by the first and second quarter of the next year, respectively.

A rebound towards 352.50 is on the cards

“In EM, the consensus-beating 2Q GDP expansion of 2.7% QoQ and 17.9% YoY in Hungary cemented the case for a third rate increase by the MNB today. A 30bp move would lift the policy rate to 1.50%, the highest in the EU. PM Orban’s economic advisor Nagy upgraded the growth forecast to about 7% this year from c.5%.”

“Short-term, the EUR/HUF pair has pulled back towards a multi-month descending trend line at 348.65, also the 78.6% retracement from June.” 

“A rebound towards 352.50 and graphical levels of 356.10/356.70 is likely.” 

“In case 348.65 breaks, the pair could head lower towards 344.90 and more importantly towards the lower limit of the range at 342.85.”

“Our house forecast is for EUR/HUF to stabilise around 350 before declining further to 345 by 1Q22 and 340 by 2Q22.”