Scandi Daily 03.26
OVERVIEW – The NOK continues to show extreme relative underperformance across the board, with particular weakness against its neighboring Scandi cousin. While we do not cover the cross in our daily analysis, it is certainly worth pointing out the price action in Nok/Sek which has been in a virtual freefall over the past few days. The primary catalyst for the move has been attributed to the latest decision and accompanying statement from the Norges Bank, in which the central bank left rates on hold at 1.75% and looks to be scaling back its tightening bias to a more balanced and neutral monetary policy. While SEK correlated equity markets have managed to hold up quite well, the scaled back interest rate expectations in Norway and pressured commodity markets have forced a narrowing of yield differentials back in favor of the SEK. From here, there is very little support in Nok/Sek ahead, and with Usd/Nok recently breaking to fresh 2010 highs, look for additional declines in Nok/Sek, potentially back towards the 2009 lows by 1.1640 over the coming weeks.
Eur/Sek The market looks to be attempting to establish a base just over 9.60, 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 9.60 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 last Friday’s drop to Fresh 2010 lows and reversing sharply back above 8.00 this week. 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 finally broken some multi-day consolidation with gains extending to fresh 2010 highs beyond 6.05. The overall structure remains grossly constructive and the latest break to fresh yearly highs now confirms a fresh medium-term higher low by 5.80 and likely opens the next upside extension back towards the 6.20 area 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 in anticipation of a major bounce over the coming sessions. Look for the latest push back above 8.95 to now accelerate gains back towards 9.20 over the coming days, with the market triggering an inverse h&s pattern.
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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