Forint could face a big recovery, breaks records

A few weeks ago the forint broke through key points. For a short while, it looked as if the breakout might not have been successful. The current strengthening is driven by a technical factor, and the realistic target for the exchange rate to return to the range it was in during the pandemic.

The forint recently broke through key points into strength and then fell back when S&P downgraded Hungarian sovereign debt. But the weakness lasted only two days. After that, the soaring continued as if nothing had happened.

The euro fell to 382 forints, which is a good result in the short term. The last time the euro was here was 9 months ago, and since then it has been weakening continuously. According to Napi.hu, the current strengthening is driven by a technical factor.

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The point that the forint crossed was roughly around 390-393, which was a major resistance for a long time. A few weeks ago, however, the forint managed to break through it, although it had been stuck there several times in the past. After the country downgrade, however, there was a renewed strong weakness: for a few days it looked as if the breakout would not be achieved.

Several specific factors contributed to the breakthrough, and their overall impact was stronger than the sales wave triggered by the downgrade, allowing the recovery to start again. In fact, it has continued with great momentum: allowing the strongest point since May last year to be reached.

Key factors in the recovery of forint

A key factor was that the chances of receiving EU funds were greatly increased. The government appears to be doing its utmost to make this happen, although previous communications have suggested that the market was not secure. And if large payments in euros were to come in, the conversion would strengthen the supply of euros in the market, while the amount of foreign currency reserves could even increase.