HUF: Sell-Off Reversing But Balance of Risks Appears to Shift Towards Weaker HUF
Oct-16 11:18
EURHUF has extended the pullback from last week’s high to around 1%, with the cross currently 0.2% lower on the session. Strength across the major equity indices will be supporting the forint today, with the currency closing in on last week’s pre-sell off levels (for EURHUF that corresponds to around 388.69). Despite the pullback in spot, 1-month EURHUF risk reversals remain close to 4-month highs, suggesting that options markets continue to hedge against the risk of further HUF weakness ahead.
- Forint-specific drivers have been few and far between this week, partially owing to the quiet local data slate. However, the NBH rate decision will be closely watched next week where particular focus will be on the rhetoric from Governor Varga following recent calls for lower rates from Prime Minister Orban and Economy Minister Nagy.
- NBH officials have already stressed that tight monetary policy remains necessary, meaning it is highly unlikely that there will be a significant shift away from the Bank’s usual hawkish guidance. And while the comments from Orban and Nagy do not necessarily represent a change of view, they nonetheless mark a renewal of the public dispute between the NBH and government which could undermine policymakers’ efforts to shore up the forint.
- Indeed, ING note that while the NBH may restore greater market confidence that rate cuts are not on the table, they do not expect the market to resume the same level of long HUF trades. They say the balance of risk is shifting to the weaker side of the HUF again in the medium term.
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OUTLOOK: GBPUSD Breaches Resistance
Sep-16 11:10
- In FX, the trend theme in EURUSD remains bullish. Today’s gains have resulted in a climb above 1.1789, the Jul 24 high, exposing 1.1829, the Jul 01 high and bull trigger. Clearance of this hurdle would confirm a resumption of the primary uptrend. Support to watch is the 50-day EMA, at 1.1643. A clear breach of it would signal scope for a deeper retracement. First support lies at 1.1694, the 20-day EMA.
- A bullish theme in GBPUSD remains intact and price is trading higher this week. The pair has traded through resistance at 1.3595, the Aug 14 high and a bull trigger. The break strengthens bullish conditions and opens 1.3681 next, the Jul 4 high. Initial firm support to watch is 1.3480, the 50-day EMA.
- USDJPY continues to trade inside its range. Key short-term support to watch is 146.21, the Aug 14 low and a bear trigger. A break of this level would highlight a stronger bearish threat and highlight a range breakout. This would expose 145.40, 50% of the Apr - Aug upleg. On the upside, clearance of 149.14, the Sep 3 high is required to reinstate a bullish theme.
EURIBOR OPTIONS: Mid Curve spread trades for more
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OUTLOOK: Price Signal Summary - Gold Bulls Still In Charge
Sep-16 10:58
- On the commodity front, Gold remains in a clear bull cycle and has started the week on a firmer note - yesterday the metal traded to a fresh all-time high, once again. The break higher confirms a resumption of the primary uptrend and an extension of the sequence of higher highs and higher lows. The next objective is the $3700.00 handle and $3705.2, a 1.382 projection of the May 15 - Jun 16 - 30 price swing. Initial firm support lies at $3532.8, the 20-day EMA.
- In the oil space, the trend condition in WTI futures is unchanged - a bear cycle remains intact and short-term gains are considered corrective. The pullback from the Sep 2 high highlights a possible recent reversal and the end of a corrective phase between Aug 13 - Sep 2. Initial resistance to watch is $66.03, the Sep 2 high. Key short-term resistance has been defined at $69.36, the Jul 30 high. A stronger resumption of weakness would open $57.71, the May 30 low.
