OVERVIEW – The focus continues to be on the relative underperformance in the NOK which has now officially snapped a string of four consecutive weekly gains against the Euro, while also putting in the worst quarterly performance against the buck since the last three months of 2008. All of this has been triggered by some significantly scaled back interest rate expectations for the Norges Bank, after the central bank left rates on hold in the previous week at 1.75% and adopted a more balanced and less hawkish approach to monetary policy. Technically, we have been warning of the regional currencies being overbought for sometime, and we believe we could finally be seeing the fundamental catalyst for such a shift. Sweden has not been hit as hard of late, but we feel the SEK is also at risk for relative underperformance against the major currencies over the medium-term. Looking ahead, all eyes turn to Swedish retail sales due out at 7:30GMT.
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 several days back failed to garner any bearish momentum, with the market rejecting the drop to fresh 2010 lows and reversing sharply back above 8.13 thus far. Next key resistance comes in by 8.25, and a break above this level will officially shift the structure.
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.
Has finally broken some multi-day consolidation with gains extending to 2010 highs beyond 6.05. The overall structure remains grossly constructive and the latest break to 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. Any setbacks should now be well supported ahead of 5.90.
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.
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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