EURHUF - Multi week bull over, but correction slows down too
There will be NBH rate setting meeting tomorrow. Mkt expects further 10 bps cut and a new all time low base rate. It is still very obvious, that Hungarian policy makers do not want to see too much HUF appreciation. Maybe they tolerate 300-305, but there they would likely come up with some new innovative idea to weaken their ccy. (like they did last time)
Weekly:
- I think this picture is neutral now, hard to understand price action relative to averages
- Price is shaded by Kumo ahead, Tenkan/Kijun still weak bullish, Price trades between these two averages, still above 100 weeks WMA. Chikou Span is at past candles.
- Heikin Ashi is bearish, with sime tiny momentum slow down.
Daily:
- Quick and agressive correction from the top pushed Price below Kijun Sen, actually down into the Kumo cloud and to 100 WMA. The current Kumo is still very thick below, which means 305-308 is a strong supp/res zone. Tenkan and Kijun are almost at same level ard 313,30, which is a strong upper resistance now.
- Heikin Ashi is still bearish, but after haDelta hit an extreme low, it started to correct towards zero line, which means the candle bodies are smaller and smaller each after.
- The momentum of drop decreased, we will likely see some sideaway consolidation or a pull back towards 312. I think it is wise to close some shorts.
So that is what we have technically.
Besides that we have a very dovish National Bank, which is trying to use any tools that can cause a smooth and further weaking of the HUF, but on the other side they have way too much FX reserves, which needs to be offloaded in the future.
C/A is still very positive, and I don't really see anything what could deteriorate it. That is appr. 800 mio EUR/month inflow to Hungary.
Bond market is kind of safe, with a continously steepening bond curve, and with a lot of focus on increasing weight of domestic funding. Actually 3-5 years maturity retail CPI linked floaters provide annual coupon of past year CPI + 3,5 %, compared to bank deposits and short T-Bills at or below 1 % p.a. Meanwhile the "shut down" of 2 weeks NBH deposit facility from September forces commercial banks to load more HUF denom bonds on their books. All in all the domestic demand is enough now to counter any international selling, or portfolio outflow.
I think for some time it is very likely that EURHUF will stuck in 305-315 range. On the lower side NBH will be active, but the upper side is also limited to shocks, as we saw during the Greek crisis HUF did not really become too volatile.
I also think NBH would be happy with an annual 3-4 % HUF devaluation on average, so they can also be active on the top side (closer to 320) with some FX reserve selling (silent intervention)
Weekly:
- I think this picture is neutral now, hard to understand price action relative to averages
- Price is shaded by Kumo ahead, Tenkan/Kijun still weak bullish, Price trades between these two averages, still above 100 weeks WMA. Chikou Span is at past candles.
- Heikin Ashi is bearish, with sime tiny momentum slow down.
Daily:
- Quick and agressive correction from the top pushed Price below Kijun Sen, actually down into the Kumo cloud and to 100 WMA. The current Kumo is still very thick below, which means 305-308 is a strong supp/res zone. Tenkan and Kijun are almost at same level ard 313,30, which is a strong upper resistance now.
- Heikin Ashi is still bearish, but after haDelta hit an extreme low, it started to correct towards zero line, which means the candle bodies are smaller and smaller each after.
- The momentum of drop decreased, we will likely see some sideaway consolidation or a pull back towards 312. I think it is wise to close some shorts.
So that is what we have technically.
Besides that we have a very dovish National Bank, which is trying to use any tools that can cause a smooth and further weaking of the HUF, but on the other side they have way too much FX reserves, which needs to be offloaded in the future.
C/A is still very positive, and I don't really see anything what could deteriorate it. That is appr. 800 mio EUR/month inflow to Hungary.
Bond market is kind of safe, with a continously steepening bond curve, and with a lot of focus on increasing weight of domestic funding. Actually 3-5 years maturity retail CPI linked floaters provide annual coupon of past year CPI + 3,5 %, compared to bank deposits and short T-Bills at or below 1 % p.a. Meanwhile the "shut down" of 2 weeks NBH deposit facility from September forces commercial banks to load more HUF denom bonds on their books. All in all the domestic demand is enough now to counter any international selling, or portfolio outflow.
I think for some time it is very likely that EURHUF will stuck in 305-315 range. On the lower side NBH will be active, but the upper side is also limited to shocks, as we saw during the Greek crisis HUF did not really become too volatile.
I also think NBH would be happy with an annual 3-4 % HUF devaluation on average, so they can also be active on the top side (closer to 320) with some FX reserve selling (silent intervention)
