Krona Sees Cross Related Interest Following Upbeat Nordea Outlook

OVERVIEW – Nordea Bank has come out with a rather upbeat outlook for the Swedish economy over the next year, and has called for rates to go up by 1.25% in 2011. This is in sharp contrast to the Norwegian outlook which has concurrently been downgraded by the same bank. As such, we have seen some solid cross related offers in Nok/Sek and the pressure could persist given the current environment which already favors lower yielding currencies. The relative weakness in the NOK has been impressive, with the single currency even selling off quite hard following a day which saw retail sales come in much better than expected. Still, faltering oil prices and broader global macro themes seem to be playing a more important role than local fundamentals, and we would expect for this to continue to be the case going forward.

Eur/Sek Remains locked in an intense downtrend with the latest bounce merely classed as corrective at this point. For now it appears as though the market is looking to carve out a fresh lower top below 9.55 ahead of the next downside extension below the yearly lows at 9.33. A break and close back above 9.55 would be requires at a minimum to relieve downside pressures.

Eur/Nok Overall price action remains quite choppy with the market most recently stalling out ahead of the multi-day range lows by 7.80 and bouncing back into the mid-range. From here, look for additional upside to test the range highs over the coming days which come in by 8.20. Look for a break back above the 8 handle to confirm and accelerate. Below 7.80 delays.

Usd/SekThe market has been locked in some sideways trade over the past several days since rallying sharply after stalling out ahead of the 7 handle, and from here it is difficult to determine whether we are in the process of carving out a higher low above 7.04, or a lower top by 7.51 ahead of the next drop. As such, look for a close back above 7.51 or below 7.29 for clearer directional bias.

Usd/Nok The cross looks to have carved out a meaningful base ahead of 5.90, following the latest surge back above 6.20. From here it is difficult to determine whether or not the rally will continue, with the downtrend from June still intact and the market potentially looking to carve a fresh lower top below 6.40. As such, we would need to see a break back above 6.37 to encourage an official shift in the structure and open some fresh upside.

Gbp/NokThe market has been well capped by some solid range resistance just over 9.80 to result in the latest minor pullback. However, the overall structure remains quite bullish with the cross trending higher over the past few months, and we would expect to see any setbacks well supported ahead of 9.40. A break and close back above 9.82 would also confirm bullish bias and accelerate gains.

NOK/JPY DAILY

Bloomberg

Nok/JpyDespite the latest break to fresh 2010 lows below multi-week range support by 13.50, the overall price action still remains quite consolidative in the 13-14.50 area and our recommendation is to continue to play the range high lows.

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com

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