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If we look at it from a technical analysis point of view, what has happened to the EURHUF exchange rate since it fell to a new all-time low of 369.8 in early April, we can see that in June, the forint was only able to recover to 342.6, then it began to weaken again, and in early August it could not even test the 200-day moving average, but the forint movement in the 344 region stalled slightly above it.
It is not a coincidence that the forint could not strengthen further in the summer in the favorable global climate for investors, despite the rebound in the corona virus crisis – a very strong technical hurdle loomed in front of it. That’s the 11-year trend line, which slowed further until spring 2020, stopped the forint from fallingThen as soon as the exchange rate rose above 340.7 in March, thereafter it acted as support and stopped the forint’s attempts to rally in the summer.
So this is the big picture, and if we look at the EURHUF movement in recent months in light of all of this, plotting other methods of technical analysis on the chart, we can see that after the forint’s attempts to rally in the summer , the exchange rate emerged from the triangle in mid-August. Then this week the rise in the 356.5 resistance stalled for the first time, but for the second time today, it broke through with great momentum and immediately went through the 357.5 resistance as well. Thus, today, since the beginning of April, it has not seen highs, the exchange rate rose to 359.
Now the 360 round level can be psychologically weak resistance. the 61.8% Fibonacci correction level, which is stronger than the exchange rate and stronger than the spring peak of 369.8 to the local low of 342.6 on June 10, It is located at 359.4. As a result, the exchange rate was only a penny today.
If the EURHUF were to move higher through this 359.4-360 resistance zone, the historical low of the forint formed in the spring would hit the investors’ target crossover, this would be the next strong resistance level at 369.5-369.8. As the exchange rate has never been higher than this, it is difficult to find a hold on how long the EUFHUF could exceed this at some point. However, we try to find a handrail and for that we go back to the past. We look at the extent to which the three new historical depths of the forint emerged during the exchange rate movement, that is, the range in which the forint was hedged. As can be seen in the figure below: the forint temporarily strengthened to 301.5 in the summer of 2017, then fell to 330.7 in the summer of 2018, which was the all-time low of the then forint. This represented a move of 29.2 units. In the spring of 2019, the exchange rate temporarily faltered to 312.6, from where a further wave of forint weakness began, which eventually lasted to the exchange rate of 340.7 this spring, where the forint was formed further. weak so far. This means an exchange rate range of 28 units.
Then, at the start of the coronavirus crisis, the EURHUF broke the 11-year trend line mentioned above and jumped to 369.8, which again represents 29 movements of the unit exchange rate. In the summer he was able to correct the exchange rate and 342.6
If to this we add the exchange rate range of 28-29 units of the last 3 periods, then an exchange rate cap of 370.6-371.6 would be added, which would mean another historical low for the forint.
Thus, with this approach to technical analysis, the forint’s decline could stop slightly above the 370 level, but it would also signify a turn from a new low.
Cover Image Source: Arne Dedert / Picture Alliance via Getty Images
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