USD/HUF: A Contrarian View on a Historical TrendUSD/HUF
"History doesn't repeat itself, but it often ryhmes."
This is an idea based on personal analysis and is not financial advice. The content reflects my current market perspective on USD/HUF, which has been a challenging trade for me personally. Your own due diligence is essential.
My analysis suggests that the Hungarian Forint's recent strength may be nearing a seasonal and technical reversal. A confluence of historical patterns, a contrarian market sentiment, and technical indicators point to a potential bottoming process for USD/HUF in the coming weeks.
Analysis & Rationale
Seasonality & Historical Context
Seasonal Pattern: Historically, the period from the second half of September to the first half of October has often marked a significant low for USD/HUF. This pattern was particularly evident in years with similar price action, such as 2008, 2011, and 2021.
Macro Correlation: Interestingly, these years were followed by major financial crises (2009 housing bubble, 2012 EU debt crisis, and the 2022 COVID-19 related market disruptions). While history doesn't repeat, it often "rhymes," and the current global economic backdrop warrants caution.
Political Precedent: The price action from 2017 is also highly relevant. During his first term, President Trump's administration had a stated goal of decreasing the dollar's value, which created a similar environment to today's market.
Market & Technical Breakdown
Market Sentiment: A strong contrarian signal is the overwhelming consensus among local Hungarian financial outlets. They are widely praising the Forint's strength and predicting long-term gains against major currencies, which can often precede a reversal.
Technical Indicators: While I primarily use price action, a look at key indicators supports a bullish reversal. The RSI, Stochastic, MACD, and Williams %R are all in a range indicating an oversold condition.
Smart Money Concepts (SMC): From an SMC perspective, price has moved into a monthly Fair Value Gap (FVG) positioned beneath a short-term low (the blue gap on the chart). There is also a weekly FVG (the red gap) below it, which could be the ultimate target before a significant reversal.
Trading Plan
The current price action is that of a "falling knife." Given the upcoming FED interest rate decision, I would advise caution. I am personally waiting for Thurseday to consider adding to my existing position.
While historical data suggests the ultimate low could be a few months away, a dollar-cost averaging (DCA) strategy at these price levels is a reasonable approach in my opinion.
"Be fearful when others are greedy, and greedy when others are fearful."
