Yesterday, the Hungarian forint plunged sending the EUR/HUF pair above the 254. resistence as ECB Trichet’s hawkish comments triggered a sell-off in all Central European FX markets.
Initially it didn’t look like a bad day for the forint. EUR/HUF moved sideways just above the 253 support, while an excellent outcome of the 3Y government bond auction even opened the way for some forint’s gains. Nevertheless, the ECB press conference turned sentiment dramatically and the forint came under heavy selling pressure in the afternoon. The EUR/HUF pair easily broke the 254.00 resistance and furhter out even tested the 11-weeks high at 254.35. This resistance survived and the Hungarian currency found some ground at the end of the session.
General sentiment in European emerging markets again will define today’s price action, but also the technical picture should be taken into account. A break of the EUR/HUF 254.35 resistance would open the way to the 255 zone. All in all, the short-term outlook for the forint is clearly bearish and we expect this to stay that way until the April parliamentary elections.
(CSOB - Investment research)