– The regional currencies performed extremely well in Wednesday trade with the renewed demand for risk helping to bolster demand for the Scandi currencies which continue to show solid fundamentals and attractive yield differentials. Norway is already well into its tightening policy, while Sweden has just begun its track of a shift to more restrictive monetary policy. The Norwegian krone was the big winner on Wednesday with the single currency outperforming all other major currencies. However, we continue to warn traders of a near-term reversal in these markets on technical merits, which would result in some significant profit taking and nordic weakness. We have just now formally established fresh long positions in Eur/Sek
, and will be looking to establish a Usd/Nok
long on a test of the 100-Day SMA.
Interday studies are quite stretched and as per our earlier commentary we are going to attempt a counter trend long position following the latest close below 9.40. We do not expect the market to hold below this figure and look for some immediate corrective upside over the coming session. Long @ 9.3850 for an open objective; stop 9.3450.
Despite the latest setbacks below 8.00, price action still remains constructive since early June with the market posting a series of higher lows and higher highs. Look for the next higher low to carve out at current levels in the 7.90 area ahead of the next upside extension beyond 8.12 over the coming days.
The objective of the major head and shoulders top has now been reached with the market dropping to the 7.35 area in Wednesday trade. Daily studies are now oversold and this in conjunction with the market finally reaching some significant previous range resistance now turned support from April, reinforces our highly constructive outlook from here, and we are establishing a fresh long by 7.36 with stops placed by 7.19, in anticipation of a reversal back towards 7.80 at a minimum.
Usd/Nok Despite the latest pullback, the market still remains confined to a broader uptrend, and any additional setbacks should now be limited to the 100-Day SMA by 6.17, which has propped the market for a large majority of the year. As such, we recommend looking to buy on a dip towards the 100-Day SMA should it be tested over the coming sessions in anticipation of a bullish resumption.
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 below 9.50. However, bull channel support now comes in at current levels around 9.50, and we would look for a fresh higher low to carve out ahead of the next major upside extension.
Market confines to a 13.50-14.50 range since May, with the price currently locked somewhere in the middle of this range and looking to retest the range highs by 14.50 over the coming days. Ultimately, the overriding trend still remains quite bearish, so any rallies towards 14.50 should be sold.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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