Scandi Daily 03.24
OVERVIEW – A slower than expected economic recovery, signs of weakness in the manufacturing sector, concerns over the appreciation in the NOK, and deterioration in the economic fundamentals of trading partners, are all factors that will heavily influence the Norges Bank when it decides on rates later today. All of the above should produce a result in which the central bank leaves rates on hold at 1.75%. The Norges Bank had been the first major central bank to reverse monetary policy on solid prospects for recovery within a local economy that had held up quite well throughout the global downturn. However, things have slowed down of late and this could ultimately put some pressure back on the Krone which looks to be due for some medium-term corrective declines. Other data in the region should also be watched today, including; the Norwegian unemployment rate and Swedish consumer confidence.
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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