Positive prognosis: Forint will strengthen to 345 EUR/HUF level?

If the forint manages to break through the critical exchange rate level that it has been besieging for months, it would bring along a significant strengthening of the Hungarian currency.

The domestic currency has strengthened markedly since last October’s very weak performance, when the EUR/HUF exchange rate was 435. Since March, however, the lowest point of the forint was 400 against the euro. In April, the forint reached the important level of 370 and has remained close to it since, not going above 380, napi.hu writes.

The significance of the 370 level is that it had been the weakest level for almost two years after March 2020. It had “held” the exchange rate for several occasions. It thus became a strong support for the forint from a technical point of view. In the months before the war, when gas prices rose sharply as a result of Russian manipulation, it slightly exceeded it, but remained close to it, napi.hu recalls.

The third try of the forint

In April, the forint first moved towards strength, followed by a sharp bounce back to 378. In May, the exchange rate tried again to break the level, holding between 368-370 for several days, but a second sharp bounce ended the attempt again. We wrote about this fall in detail HERE.

The EUR/HUF exchange rate at 9.50 PM on 5 June 2023.

Of course, the outcome is not yet known. However, there is something to note here, is a typical process in technical analysis and is often seen in various liquid, high-turnover assets (stocks, currencies, gold). In cases like this, the exchange rate bounces back three times from the strong level, but the fourth attempt is successful and is usually followed by a very strong further move, napi.hu explains.

If a similar situation were to occur for the forint, i.e. a breakthrough is not possible now, but it is possible next time, the EUR/HUF exchange rate could fall to 345, as this the next important level.

Of course, if a breakthrough is achieved now, there could still be a fair recovery.

Will Hungary ever see the euro as its currency? The governor of the Hungarian central bank talked about this recently, read his stance HERE.