PLN, HUF and RON: much more needed for a large move

Polish Zloty (EUR/PLN) – the 4.20 level under pressure

It is really surprising that on such a supposedly volatile currency like the PLN, so little is going on. The EUR/USD, the Aussie, Kiwi or Cable – all those kept moving back and forth. The Polish Zloty? Stable. Even the Fed’s decision to keep interest rates unchanged had little effect on the local currency. Why could that be? Well, the monetary policy of the MPC seems pretty straightforward and expected. Interest rates should remain at its lowest historical level of 1.5% till the end of 2016. The published macro data only confirm these expectations. The CPI indicator stood at -0.6% (yearly basis) while the Core CPI at 0.4% (both in line with forecasts). To balance it out, the PPI index dropped by 2.7%. To mix it up even more, other pro-inflationary publications were slightly higher than forecasts– average wages in August increased by 3.4% (yearly basis) while industrial production was higher by 5.3%. Still, the MPC is straightforward in communicating its monetary policy moves, so we should not expect any surprises any time soon. In this case, external events should affect the Zloty. This past week they have not though. To be honest, in the last couple of weeks the PLN has not been the greatest currency for speculators as its behavior can be described as very “polite”.

As we see on the daily chart, during the previous week the EUR/PLN has reached the 4.20 support and as expected, the fight has began. This past week, the market has been steadily declining, breaking the support. Does this mean we should expect a downward move? Not necessarily. What we are observing could be a false breakout and the market could come back to levels above 4.20. The stochastic oscillator shows the EUR/PLN is oversold and that such scenario is possible. In this case I would expect the market to reach 4.23. On the other hand, if the EUR/PLN finishes the week at around 4.19, I would see the market heading towards 4.16.

Pic.1 EUR/PLN D1 source: xStation

Hungarian Forint (EUR/HUF) – Good week for the EM markets and the HUF

Moody’s Investor Service has changed the outlook and rating of Hungarian banks. Tha rating agency has downgraded FHB Mortgage Bank to Caa2 from Caa1. On the other hand, Kereskedelmi & Hitel Bank Rt.’s (K&H) and Erste Bank Hungary long-term deposit ratings have changed to stable from negative. What we are waiting for is next week’s National Bank of Hungary’s interest rate decision. Hungary’s international reserves dropped by 1.079 billion euros to 33.536 bln euros in August, the lowest level in nearly two years. Half of the decline in the 8th month of the year is thought to be caused by the foreign currency liquidity provided by the central bank to commercial banks for the conversion of the remaining Swiss franc-denominated loans into Forints. The NBH probably will not cut rates next Tuesday so from the fundamental point of view, the Forint should stay in good shape.

Taking a look at the daily chart, we can see the EUR/HUF moved closer to last month’s support at 307. The Fibonacci 61.8% retracement level made its homework and turned around the market at 315 again. We are expecting more positive movement of the Forint in the upcoming 1-2 weeks, especially if the currency pair will break down the 200 DEMA.

Pic.2 EUR/HUF D1

Polish Zloty (EUR/PLN) – the 4.20 level under pressure It is really surprising that on such a supposedly volatile currency like the PLN, so little is going on. The EUR/USD, the Aussie, Kiwi or Cable – all those kept moving back and forth. The Polish Zloty? Stable. Even the Fed’s decision to keep interest rates unchanged had little effect on the local currency. Why could that be? Well, the monetary policy of the MPC seems pretty straightforward and expected. Interest rates should remain at its

(Market News Provided by FXstreet)