Scandi Daily 02.25
OVERVIEW – The only two currencies weaker than the higher yielding Australian and New Zealand Dollars on the day are the SEK and NOK; a clear reflection of a real shift in sentiment and rise in risk aversion. The regional currencies have been a formidable proxy for risk (better than Aussie and Kiwi) and the underperformance in Thursday trade clearly reflects the severity of the price action in the FX markets. While Citigroup has come out with a recommendation to look to sell Eur/Nok, we continue to maintain a very aggressive bullish outlook on the cross, in light of the technically oversold market and lingering global macro uncertainty. The fact that an escalation in fears over the state of the EU has still resulted in a stronger Euro against the regionals on Thursday, provides a solid affirmation of our view.
Eur/Sek Monday’s bearish price action has delayed hope for an immediate recovery, with the market extending declines to fresh yearly lows by 9.75. Nevertheless, with daily studies trading in deep oversold territory, the risk of a major corrective rally is significant, and we continue to like the idea of looking to build a long position at current levels.
Eur/Nok While daily studies are not as overdone as in Eur/Sek, we contend that a meaningful low has also been put in by the 8 handle last Wednesday and Thursday, with Thursday’s strong bullish outside day confirming bias. From here, look for some renewed strength back towards the recent range highs at 8.26 over the coming days.
Usd/Sek our view is highly constructive at current levels and favors continued USD appreciation over the coming weeks. We contend the market is attempting to carve out a major base rather than in the process of some bearish consolidation. Any setbacks are expected to be well supported by 7.00, with a higher low sought out ahead of the next major upside extension towards 7.50-75 over the medium-term.
Usd/Nok has just managed to clear the multi-week range highs by 5.90 and we believe this now opens some fresh medium-term upside over the coming weeks. Look for a higher low to now carve out by 5.80 in favor of a bullish resumption back above 6.05 over the coming days.
Gbp/Nok in the process of rolling back over after stalling by the multi-day range highs just over 9.50. Look for the latest pullback into the 9.10-15 area to now be well supported ahead of an eventual sustained break above 9.50 which should open some medium-term gains towards the 10 handle over the coming weeks. Only a close back below 9.00 ultimately gives reason for concern.
Nok/Jpy has been well confined to a very choppy range trade over the past several weeks, largely defined between 15.00 and 16.50. Rallies have once again been well propped in the 15.00 area ahead of the latest bounce back into the range. From here, we recommend continuing to play the range.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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