Polish Zloty (EUR/PLN) – Upward move denied after NFP

Traders were back from the Easter holiday and right away got some action on the markets. The main impulses came from the BoJ, the ECB and the BoE and especially Friday’s disappointing NFP. Disappointing to those who were expecting a great reading again, which could have caused the Fed to start consider reducing QE sooner than in 2014. Well, that is not happening, at least not soon. On the emerging markets’ currencies we observed higher volatility than during the previous week. The Polish zloty danced to the music played by global factors as the only macro data we got was Monday’s weak PMI reading of 48.00 points. Would that make the MPC to consider another interest rate cut soon? It should, but I do not think it can happen in April.

On the chart, we see the EUR/PLN rebounded from the short-term upward trendline and reached 4.1975, its highest since February. PLN bulls took over and a corrective movement began, which was strengthened after the NFP publication. The EUR/PLN broke the trendline as well as the 4.18 support level reaching 4.17 by the end of the week. What can we expect next? The stochastic oscillator is inconclusive and the next support is very close at 4.1660. Breaking it would push the market down to 4.1550. A rebound should take the market back to 4.18. Due to the lack of crucial local macro data, next week again global factors will be moving the PLN.

Pic.1 EUR/PLN D1 Chart

Hungarian Forint (EUR/HUF) – Little spring break for forint

Looking at the performance of Hungarian bonds it seems that investors confidence is still unbroken. In the first quarter of 2013 the debt management agency ÁKK managed to sell 400 billion forint denominated government bonds that is slightly above the proportionate yearly plan.
The big hurry of investors is due the continuous rate cuts that are expected to run until the MNB reaches the 4,5% rate target from the current 5%. This is also exactly the reason that forint weakened against the majors but getting closer to the easing cycle the trend might reverse.
This week the headlines were noisy from the new MNB announcement to offer interest-free money for local banks that can channel loans to small and midsize businesses in an effort to boost the economy. On Thursday ECB’s Mario Draghi talked about a similar possible action and indeed markets accepted the announcement rather positively.

Pic.2 EUR/HUF D1 Chart

Technically a handy support zone is visible around the 295 level for the EUR/HUF where the daily 200 SMA and the ascending trendline meet together. Around the mentioned level daytaders might close their short positions that go against the long trend. Speaking about reversal is still early as other indications like price action are still missing.

Romanian Leu (EUR/RON) – Appreciation of the RON possible

The Romanian Leu has been slowly losing ground this week on the back of political wrangling that appears to push the governing alliance closer to the brink. The after-effects of Cyprus also affect the banking system, due to the psychological link Cyprus – Greece – Greek capital owning banks in Romania. The unemployment rate moved up to 6.7%, yet it is still in the lower range of EU parameters. Good news came on the GDP growth in 2012, with a 0.7% increase that was much larger than the 0.3% expected. Yet, it did not manage to reverse the fortune of the RON. Ample liquidity in the system (possibly to continue until the second half of the month) helped the EUR/RON move slightly higher. Overall pressure may persist, but barring a strong risk-off global view, distance to be covered may remain limited.

In the technical view, short-term 4.4280 resistance is followed by a stronger one around 4.4410. The 61.8% retracement placed at 4.4556 offers the next level to watch. The candlestick formation is not giving a clear go-ahead signal, so a range view may still be taken by the market if bulls fail to breach 4.4280, with support at 4.4000 and then 4.3880.

Pic.3 EUR/RON D1 Chart