The Hungarian economy shrank 2.7% in Q4 2012, a huge gap from economists expectations for a 2.0% decline. Y/Y economy shrank 1.7% compared to 2011. As we approach election season, traders are expecting the incumbent Government to adopt stronger monetary policies in order to jump start their economy, which allowed speculators to start shorting the Forint against EUR, despite EUR facing equal problems with German and French GDP both worse than expected.
Price flew higher to touch 292.50, close to the swing high observed on 12th Feb, adding huge volatility into the market in the process. It is important to note that price was already on the verge of breaking 290.50 support turned resistance shortly before the GDP announcement, despite EUR’s weakening which saw EUR/USD trading below 1.34 after German and French data. It seems that there is inherent bullishness in EUR/HUF and the driving force is in HUF itself and not EUR. Should this observation is true, we could see stronger bullish follow-through post 292.5 if bullishness in EUR flows back into the market. On the flip side, as EUR is more broadly traded and would have a larger bearing of EUR/HUF direction, should Euro-Zone continue to publish disappointing economic data, price may take a dip no matter how weak HUF may have become.
Weakly chart shows potential bullishness with a Kumo Twist potentially in the works. However, price is currently trading within the Kumo, with the previous attempt to break the Kumo being rebuffed. Stochastic is also showing a potential short-term top with a Signal line cross within the Overbought region. This hint of price potentially heading lower, but eventually finding support along Kumo bottom (Senkou Span A – Green line), or perhaps slightly below around 285.0 round figure before a push higher. Bulls may wish to wait for the Kumo twist to take place, with confirmation of a Kumo bullish breakout for a true EUR/HUF bullish push, as price is still looking bearish with lower highs and lower lows since Jan 2012.
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