Scandi Daily 03.11
OVERVIEW – Although the inflation data in Norway came in firmer than expectation, evidence of an overall softening in the data when compared to previous prints is being attributed to the strong appreciation in the local currency. The Norges Bank has expressed concerns with the overwhelming demand for the NOK, and as such, has been taking this into consideration with their monetary policy. While economic fundamentals have been quite sound in the region, the Scandis are still very much tied to broader global macro themes, and we continue to maintain a medium-term bearish Scandi outlook, with the regional currencies showing overbought against many of the major currencies. Our favorite trades are looking to buy Eur/Sek and Gbp/Nok. Looking ahead, inflation data is on tap in Sweden at 8:30GMT and could influence price action.
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 Although the market has now broken below the major base from October 2009 at 8.80, daily studies are highly oversold and warn of some major corrective upside ahead. We continue to recommend building long positions at current levels by 8.80 in anticipation of a major bounce over the coming sessions.
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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