– We have been off the desk for a few weeks and although nothing has materially changed from a price action standpoint in the regional rates that we cover, there has been some compelling price action in the Nok/Sek cross rate. The cross has been under some intense pressure of late, with the SEK outperforming the NOK on the back of what appears to be a combination of weaker oil
prices and narrowing yield differentials back in favor of the Swedish currency. While the Norges Bank looks to be more likely to remain on hold for now, the Riksbank could be just getting started with its more restrictive monetary policy, which ultimately could continue to weigh on the cross. However, we would recommend that Nok/Sek bears proceed with caution at current levels with the market dropping into some formidable medium-term support. Oil prices and equities have also started to rebound which could also result in some Nok/Sek profit taking.
Despite the continued downside pressure to fresh 2010 lows by 9.50, longer-term technicals show room for plenty of corrective upside. We do not recommend buying at current levels right now, but would instead wait for a dip below 9.50 to look to buy, or waiting for a bounce and looking to buy an upside break beyond 9.70. Any additional downside from current levels should be limited.
A very well defined bear channel dating back to mid-2009 looks to have finally been violated, with the market rallying sharply back above 8.00 and suggesting that a key low has been set down by 7.67, in favor of additional gains over the medium-term back towards the 8.40-50 area. We would recommend looking for opportunities to buy below 8.00.
Remains under pressure since breaking down from a head & shoulders top that could now project additional weakness over the coming days into the 7.30’s. Nevertheless, we continue to maintain a broader bullish outlook here and would recommend looking to take advantage of any oversold interday studies, to look to establish a meaningful long.
This market has yet to break down through the neckline of its head and shoulders top and continues to consolidate above 6.30 despite the broader USD
declines. As such, our overall outlook remains constructive with an eventual rally seen back above 6.73 over the coming weeks. Only a close below 6.30 gives reason for concern.
Has been in an impressive bull channel since mid-March, with the market rallying to the 9.80 area ahead of the latest minor pullback. Look for some additional weakness over the coming days, with a fresh channel higher low now sought out in the 9.50 area, ahead of the next upside extension beyond 9.80.
Although the market remains under pressure and appears to be consolidating just over its yearly lows, the cross has also managed to impressively hold above the 13.50 figure on a close basis. As such we could be on the verge of seeing another bounce and we would recommend looking for a break back above 13.80 to confirm and potentially accelerate gains back towards 14.50. Below 13.50 negates.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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