– Norges Bank Governor Qvigstad was on the wires on Tuesday talking FX, with the central banker saying that the NOK, which has gained well over 5% on the year against the Euro
, is at the levels that were to be expected given the current market conditions. However, the Governor went on to say that the appreciation in the local currency is a long-term concern. Technically, there is certainly plenty of room for a bounce in Eur/Nok
, which trades by its yearly lows and seems to be looking overextended on a medium-term basis. Meanwhile, the Riksbank’s deputy Governor Ekholm has been out weighing the risks to lower interest rates and surging housing prices to unsustainable levels, versus higher rates and a the potential for the elevated rates to hamper the economic recovery. On the data front, softer than expected inflation data out from Sweden on Tuesday, could act as a strain on the regional currency in the days ahead.
Eur/Sek The recent 9.55 yearly lows are back under pressure and a break below will open the next downside extension to test next key psychological support at 9.50. Only back above 9.90 would delay bearish structure and force a shift in outlook.
Eur/Nok Has broken to fresh 2010 lows by 7.78 after easily clearing next downside barriers by 8.00 in recent trade. Daily studies are however looking stretched and we would not rule out the potential for a bounce from here. Nevertheless, a break back above 8.05 will be required at a minimum to get things moving and reaffirm basing prospects.
Our view is highly constructive at current levels and favors continued USD
appreciation over the coming weeks. The break to fresh 2010 highs above 7.52 now officially confirms a medium-term higher low by 7.00 and opens the next upside extension towards 8.00-8.20 over the coming weeks. Look for setbacks to now be well supported in the 7.30-40 area.
The overall structure remains grossly constructive and a fresh medium-term higher low by 5.80 is now confirmed following the latest break to fresh 2010 highs beyond 6.10. From here, the risks are for additional gains, with the next key medium-term target coming in by 6.40 over the coming weeks. Any setbacks should be well supported ahead of 5.95.
The market has finally reached our 9.20 inverse head & shoulders objective after breaking out from a multi-day consolidation in the 9.10 area. From here, we look for any setbacks to be well propped by the 9.00 handle, ahead of the next upside extension towards 9.40-50 over the coming weeks.
Has been well confined to a very choppy range trade over the past several months, largely defined between 14.00 and 16.50. Setbacks have once again been well propped by 14.00 ahead of the latest sharp bounce back into the mid-range, and we continue to recommend playing the range high-lows.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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