Scandi Daily 03.23
OVERVIEW – There has been a lot of positive sentiment surrounding the NOK over the past several months and the bullish outlook on the Norwegian economy and local currency continues with the latest support being voiced by a currency strategist at UBS who expects to see the regional currency continue to outperform on favorable global recovery prospects Nevertheless, we remain somewhat skeptical with this assessment as longer-term technical studies seem to suggest that the regional currencies could be poised for a major downside correction in the weeks ahead, both against the USD and other major currencies. Both Eur/Nok and Eur/Sek are showing signs of potential basing after recently setting fresh 2010 lows and we would recommend looking to build short Scandi positions at current levels. While the local FX market is heavily influenced by global risk appetite and commodity prices, a resurgence in these markets could still expose the NOK and SEK, with any positive news out from Greece likely to generate more significant demand for a Euro which has been so heavily beaten down of late.
Eur/Sek The market looks to have established a nice base just over 9.65, and we look for an eventual break to the upside over the coming days, with a push back over 9.83 required to confirm bullish bias. Only a close back below 9.65 would negate outlook and give reason for pause.
Eur/Nok Although overall price action remains grossly bearish, any additional declines from here seem to be limited, with the greater risk for some decent corrective upside over the medium term. The close below critical psychological barriers by the 8 handle in the previous week has failed to garner any bearish momentum, with the market rejecting Friday’s drop to Fresh 2010 lows and reversing sharply back above 8.00 on Monday. Next key resistance comes in by 8.13, and a break above this level will now be required to confirm bullish bias.
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 be in place by 5.80 in favor of a bullish resumption back above 6.05 over the coming days.
Gbp/Nok Although the market had recently broken below the major base from October 2009 at 8.80, daily studies were oversold and warned 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. Look for the latest push back above 8.95 to now accelerate gains.
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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