USDHUF - A dip to 223-224 support is possible
This move and its depth depends on two components. EURHUF and EURUSD.
Fundamentals:
After yesterdays NBH comment the pressure on HUF started to ease. Fundamentally I don't see any possible local trigger, that could blow up the HUF now in next few months (Autumn might be a different story, but thats far away).
- NBH finished with easing cycle, they gave a forward guidance to keep bmrk rate at 2,10 until end of 2015. This Guidance itself is a joke I think, Hungary is a very small and open economy, still depends a lot on external factors and external funding. My view is that they will be forced to hike rates a lot sooner than mid 2015. They think and act like the FED :-). The only problem will be that they are cornering themselves, and their rythm on timings will be a problem at some point as FED and BoE start to hike.
- The conversion of private sector FX loans to HUF is off the table for now, will happen only next year. New info about the discount exchange rate, and about the details of the burden will come from Government in November. Until then NBH reserves are safe.
- C/A is still in surplus. Short term OK. However here we have to add that trade balance surplus started to decrease a bit recently, and with giving the money back to households next year, consumption will increase a lot. Import will jump. This will have a negative effect on FX first, and as later CPI will very quickly pick up due to consumption surge and base affect as well, very soon NBH will be forced to hike rates again.
Technicals:
Daily: Big inside bar pin bar yesterday, with bearish MACD and Slow Stoch signals. Ichimoku setup itself is still bullish, but ADX is too high, and when it is so, it often brings at least a consolidation. Supports are: 226,85 / 224 / 220,70.
There are two scenraios now. As EURHUF will likely stay offered, USD huf will depend on EURUSD moves and corrective spikes more. If EUR weakens ag. USD, then USDHUF will rather show sideaway consolidation, with no real selling momentum. However if we see a spiky correction in EURUSD bearish trend, that means USDHUF will quickly break the Kijun Sen and will likely retest the Kumo
4 Hrs: There are initial bearish signs, but the trendline and the Kumo held so far. DMI turned bearish, ADX looks like turning up, which means a possible gain in bearish momentum is ahead. We have a weak Tenkan/Kijun cross, with Chikou Span below price candles now. Clearly the horizontal support area 226,50 - 227 is in line with daily Kijun Sen. Once we see a break of trend and Kumo, confirmed with break of horizontal key support area too, we will quickly see the 224 or maybe 223 handle.
Suggestion: Take partial profit on USDHUF (also on EURHUF) longs for now in spikes and get ready for full profit taking on first support breaks. Increase HUF weight in portfolio again for short term. Going short as speculative position? That is upto your trading profile and risk tolerance. This pair is really volatile and hard to trade.
Fundamentals:
After yesterdays NBH comment the pressure on HUF started to ease. Fundamentally I don't see any possible local trigger, that could blow up the HUF now in next few months (Autumn might be a different story, but thats far away).
- NBH finished with easing cycle, they gave a forward guidance to keep bmrk rate at 2,10 until end of 2015. This Guidance itself is a joke I think, Hungary is a very small and open economy, still depends a lot on external factors and external funding. My view is that they will be forced to hike rates a lot sooner than mid 2015. They think and act like the FED :-). The only problem will be that they are cornering themselves, and their rythm on timings will be a problem at some point as FED and BoE start to hike.
- The conversion of private sector FX loans to HUF is off the table for now, will happen only next year. New info about the discount exchange rate, and about the details of the burden will come from Government in November. Until then NBH reserves are safe.
- C/A is still in surplus. Short term OK. However here we have to add that trade balance surplus started to decrease a bit recently, and with giving the money back to households next year, consumption will increase a lot. Import will jump. This will have a negative effect on FX first, and as later CPI will very quickly pick up due to consumption surge and base affect as well, very soon NBH will be forced to hike rates again.
Technicals:
Daily: Big inside bar pin bar yesterday, with bearish MACD and Slow Stoch signals. Ichimoku setup itself is still bullish, but ADX is too high, and when it is so, it often brings at least a consolidation. Supports are: 226,85 / 224 / 220,70.
There are two scenraios now. As EURHUF will likely stay offered, USD huf will depend on EURUSD moves and corrective spikes more. If EUR weakens ag. USD, then USDHUF will rather show sideaway consolidation, with no real selling momentum. However if we see a spiky correction in EURUSD bearish trend, that means USDHUF will quickly break the Kijun Sen and will likely retest the Kumo
4 Hrs: There are initial bearish signs, but the trendline and the Kumo held so far. DMI turned bearish, ADX looks like turning up, which means a possible gain in bearish momentum is ahead. We have a weak Tenkan/Kijun cross, with Chikou Span below price candles now. Clearly the horizontal support area 226,50 - 227 is in line with daily Kijun Sen. Once we see a break of trend and Kumo, confirmed with break of horizontal key support area too, we will quickly see the 224 or maybe 223 handle.
Suggestion: Take partial profit on USDHUF (also on EURHUF) longs for now in spikes and get ready for full profit taking on first support breaks. Increase HUF weight in portfolio again for short term. Going short as speculative position? That is upto your trading profile and risk tolerance. This pair is really volatile and hard to trade.