HUF: EURHUF Extends Pullback From Thursday’s High, Conditions Remain Bullish

EURHUF has extended the pullback from yesterday’s high of 397.93 to 0.7% and is lower by 0.35% this morning. While the US Presidential Debate triggered initial strength in the USD and weighed on Treasuries, the moderation of the move has allowed a broader recovery across EM FX. Meanwhile, stronger producer price data for May compared to the April reading (+0.2% M/M vs. -0.9% prior) may be accounting for forint outperformance at the margins.

• Nevertheless, losses for EURHUF will so far be considered corrective from a technical standpoint given we still remain within relatively close proximity to recent highs. While the move lower today has resulted in a reversal of much of the week’s prior gains, a break of initial support at 394.33 is needed to signal scope for a stronger pullback. Topside focus therefore remains on the June highs of 398.85 ahead of key resistance at 399.75.
• ING noted today that while lower US rates may help the EM FX environment in the near-term, they suspect that investors will be pursuing high-yield FX with less enthusiasm this summer, citing idiosyncratic risk factors in the emerging markets space.