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Scandi Daily 03.08

Scandi Daily 03.08

2010-03-08 06:36:00
Joel Kruger, Technical Strategist
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OVERVIEW – The regional currencies had been well offered in the early stages of the previous week, on the back of some pared back interest rate expectations and elevated risk aversion. However, any negative sentiment towards the Scandis was wiped clean into the end of the week, with a much stronger US jobs report helping to fuel demand for risk correlated currencies. The krona was a major beneficiary of the rebound in global equity prices, while the krone managed to find some alternative bids with oil prices reaching their highest level in two months. Nevertheless, it remains to be seen whether these gains can be sustained, and we would recommend that Scandi bulls proceed with intense caution at current levels. In our opinion, the risks are for some major weakness in the regional currencies on the crosses over the coming weeks. 

scandi3.8


Eur/Sek Although the market has come back under pressure following a mild relief rally out from the 9.67 yearly lows, we still contend that price action is highly overextended and the cross is in the process of carving out a short to medium-term base at current levels, ahead of some significant upside over the coming weeks. Look for the current setbacks to once again be well supported ahead of 9.65, with the potential for the formation of a double bottom on the daily chart.

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, with recent price action 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 managed to recently 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 The market has now traded back down to retest the major base by 8.80 from October 2009 but has failed to break below this strong support. With daily studies now oversold, we would recommend that traders look to build a fresh long position at current levels in anticipation of some major upside over the coming days. Stops should be placed on a close basis below 8.80.

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 minor bounce, and we continue to recommend playing the range.

 

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